JR = Julian Rimmer (Resident Boomer and former EM markets pro turned writer.)
DGG = Dario Garcia Giner (Resident Zoomer and former corporate investigations pro turned meme stock watcher and in-house drone expert.)
TLDR: ChatGPT Summary
Market Wizards: Julian & Dario’s Bitcoin Blunders, Russian Drama, and Heroic Tales
Indian and Oil Drama: Modi’s Win & Oil Discoveries Stir Curiosity
Russian Rollercoaster: Crypto Ventures, Ozon’s Saga, and Drag Queen Denials
Signals and Spies: Signal’s CIA Origins, TOR’s Spy Makeover, and Mind Tricks
Interest Inflation: US Debt vs. Defence Spending, Job Woes, and Fed Frustration
Heroes and Villains: Pedro Sanchez’s Tango and George Santos’ Drama
Wine & Whimsy: Leroux’s ‘Grand Cru’ in Pommard, Sipping Memories
Bonus: ‘India’s Overbought Market?’ and Russia’s Gas Drama
Good morning, Dario, and I’m very sorry to understand you contracted a dreadful lurgy when you came to London?
Indeed, I am nursing myself on some lovely Ukrainian homemade honey
This guy is me every time I ‘invest’ in a stock
I pointed out they produced cooking / vegetable oil but he was insistent. ‘They won’t know the effin’ difference’.
Dear Reader, he was right.
Maybe the real risk isn’t that we don’t understand the tail risk of algo driven trading
But that we overestimate the rationality of players in the market in general
It’s like that joke about the dollar on the street not being real because if it were, it’d be picked up
He went on TV $10 from the peak its now around $30 dollars
And the highlight again provided by Bitcoin . XBTUSD traded at $44,000
Which I was delighted to be able to translate back into English as Bitcoin devotees throwing all their resources behind the Bitcoin momentum trade because life’s opportunities must be seized
Apparently, there’s something called a kimchi premium for the higher levels of live trading on Korean exchanges.
Meanwhile, in real asset markets
S&P + 10% from Oct 26th low, CTAs bought $225bn of equities in the last month,
UST10YR <4.2%, driven perhaps by fall in crude.
Saudis taking a small price cut to Asia next month, US exports at record 6bn bpd, West Texas crashing on huge build in Cushing.
10:41 JR: now combining both the crypto and the crude stories we could look at how sanctioned entities are using tether in Venezuela to trade between Russia and PDVSA
Speaking of Venezuela – we will leave an in-depth update to when the moves are clearer
But for now:
- 98% victory for the annexation fo Guyana Essequibo in Vnz
10:42 DGG:
- Maduro officially claimed the Essequibo region for Venezuela
- Ordered the creation of a military command structure for the region
But more critically
10:43 DGG:
- Stated he will immediately grant licenses for “exploitation of oil, gas, and mines in the entire area of Essequibo”
Bullish on PDVSA. Mark my words (please don’t) they’ll muscle in on some offshore Essequibo oil claims
Well, Julian, it wouldn’t surprise me if Russia had a hand in this
But not every time that Russia wins a fight does Russia wield the fighting hand
For instance, Spain has imported more Russian gas than ever before – multiplying its dependency on the stuff more than six times with respect to 2018
The culprit is Algerian-Moroccan tensions, which led to the close of the Magreb gasoduct in November 2021, shuttering a significant bit of the 45.7% of Algerian gas imports which traditionally occupied the Spanish purchase list
New one
Sometimes there are discoveries that make you go ‘yay my country is great’
Most of the time, being Spanish, it’s quite the opposite
But not all unexpected discoveries are bad – especially if you’re not Spanish
China claimed to have found a 100m tonne untouched oil reserve in Changqing
10:46 DGG:
“PetroChina has allegedly unearthed a remarkably preserved oil field boasting geological reserves of over 100 million tons, as reported by the Xinhua, China’s state-run news agency.
PetroChina’s subsidiary, Changqing Oilfield, has substantiated proven reserves of 50.24 million tons, with an anticipated additional 56.2 million tons yet to be confirmed in the region.”
Last in markets miscellany
Kits Klarenberg’s Substack has surprised me by letting us know that Signal is a CIA-baby, basically
Did you know this Julian?
Anyhow, don’t let me distract you
“In August 2018, its then-CEO openly acknowledged the Agency’s “global priorities…reflect US national security and public diplomacy interests.”
RFA’s own origins harken back to 1948. That year, National Security Council Directive 10/2 officially authorised the then-newly created CIA to engage in operations targeted at countries behind the Iron Curtain, including propaganda, economic warfare, sabotage, subversion, and “assistance to underground resistance movements.” The station was a core component of this wider effort, along with Radio Free Europe, and Radio Liberation From Bolshevism. “
Interesting – it’s like when you learn a word and suddenly you see it everywhere
Does that have a name?
It’s the Baader Meinhof effect
Interesting!
“Accordingly, Signal was and remains very prominently used and promoted by dissidents and protesters backed by the National Endowment for Democracy (NED), a US government agency explicitly created to do overtly what the CIA once did covertly. This was the case in Hong Kong, where Endowment funding serendipitously began flowing to opposition groups a year before Signal’s launch. In July 2020, it became the island’s most downloaded app, after the controversial National Security Law passed.”
The worst part, dear SMLers
Is that I had NO IDEA about it as a daily user of Signal
More proof of my ignorance is the TOR Browser that you use to buy drugs online
ahem I mean which I totally know from a friend
“Tor’s original purpose was to shield American spies from detection while deployed overseas. It was opened up to wider public use due to fears that if an enemy spy agency broke into the system, it could deanonymize users – all of whom would be CIA operatives – and monitor their statements and movements. “Democratising” Tor was intended to spread the risk of exposure, thereby insulating US intelligence and military assets.”“
Which should make you think – how much of the software you use is American (or other) spyware?
“Documents leaked by Edward Snowden reveal US and British intelligence agencies devote considerable time and resources to deanonymizing Tor users. Simultaneously though, they go to great lengths to ensure people aren’t discouraged from using the browser. One file – titled ‘Tor: Overview of Existing Techniques’ – reveals GCHQ and the NSA actively attempt to direct traffic toward servers they operate, attack other privacy software used by Tor visitors, and even undertake efforts to influence Tor’s future development.
This is understandable, given Tor – along with many other “Internet Freedom” tools championed by OTF – congregates anyone and everyone with something to hide on a single network, to which Western spying agencies have ready back-door access. Surveilling user activities and monitoring their conversations is thus made all the easier. Now, recall how “two-thirds of all mobile users globally have technology incubated by OTF on their device”?”
If you really wanna keep something a secret, a retired Spanish naval intelligence officer once told me, it should only exist in your mind
I suppose if I were a serious person I would have started with that headline rather than the meretricious pap about Bitcoin hitting $44k
Over the weekend, Modi’s victory in state elections gave investors confidence he will do similarly well in next year’s natl elections
And now the mkt is really flashing overbought
India is up 33% in the last 3yrs, it’s enjoyed 8 successive up years, it’s the world’s 5th lgst stockmkt now
And this yr alone witnessed an influx of $15bn from intls and $20bn domestically
I read another great note from Trade Routes last night in which they reiterated, very convincingly, that inflation is dead
And very much a 2022/ 2023 story but not 2024
Pressures have played themselves out after Covid supply then demand shock. Freight and logistics prices falling, durable goods same.
Inflation in consumer services / consumer space is price gouging.
10:59 JR: Housing the biggest factor. Or rent at least, but now subsiding. Central banks will target 2-3% inflation. Higher cmdty prices could cause an inflation scare in1H24 but that’s all it will be – a scare
No secret the Canadian housing market is a total dumpster fire but rise of PE firms as landlords is unsurprising considering the dismal renting laws in most western countries
I’ve always been a renter and bar a flung cigarette butt or two, I’ve always fulfilled the terms of my contract
But we’ve all heard of nightmare tenants and the myriad ways in which they can abuse the system to unfairly protect themselves from the common decency of fulfilling your word
Shoudln’t be surprised when these regulations designed to protect tenants are abused by smart undesirables , evicting single landlords and replacing them with faceless corpoations
Affectionately known as Doug by nobody in the community
Broadening of the mkt only takes place when the path of rates is clear. S&P index may not move therefore, owing to Big 7 being 28% of index. US leads on growth, rest of G7 several quarters behind.
Have we ever seen something like this before?
I think we showed a GS chart the other day to illustrate this point
Last point here… Inverted yield curve has persisted 2yrs now without a recession taking place, significant upside in the long end of the UST curve. EPS growth estimates for 2024 S&P too ambitious @ 11%.
JPM’s head of technical strategy Jason Hunter claimed it’s in for a sharp reversal to bearish lows, tumbling all the way to 3,500
He also claimed it will top out soon, and that we’re still stuck in a secular bear market – and has been saying the same since August
Do we like his opinion? or do we still hate chartists?
But for the most part we disregard them and only use charts when
a) it suits our argument
And b) more realistically, when charts confirm something one already intuits.
It means the US will spend 34% more on interest servicing than defence spending
Other US-centric data showed that job openings aren’t doing so well
“Job openings tumbled in October to their lowest in 2½ years, a sign the historically tight labour market could be loosening.
Employment openings totaled a seasonally adjusted 8.73 million for the month, a decline of 617,000, or 6.6%, the Labor Department reported Tuesday. The number was well below the 9.4 million estimate from Dow Jones and the lowest since March 2021.”
And here’s a handy chart
At least for me
I took Mike Calvey from Baring Vostok investment fund around London to see EM fund managers and try to drum up some mandates.
He was a big fish in private equity in those days
The last I heard of him, he now works at Jefferies
In one of those meetings Calvey, a decent bloke and clearly pretty savvy, was asked what he thought about Putin and he surprised me by opining he thought he’d been one of Russia’s great leaders.
It’s not a competitive field
Barely three years later, Calvey was arrested on suitably ludicrous grounds and spent 2.5 yrs incarcerated in prison or at home before eventually receiving a 5-yr suspended sentence and fleeing the country. And he was well-connected
This is standard shakedown procedure in Russia
The reason this is interesting now
Is that Baring Vostok is still trying to exit its stakes in Russian companies but the 27% stake in Ozon is valued at $1.6bn and I doubt the Russians will allow that kind of value to leave the country.
The problem is the Russians will not allow them, like all western companies – McDonalds, Carlsberg – to extract their cash
Reminds me of me
Why should the world care?
from The Bell…‘Baring Vostok was one of the largest and most important investors in modern Russia, playing a key role in establishing many leading Russian companies. But its history counts for nothing now that the fund has decided to leave and is forced to deal with a government commission with the power to delay sales or block them entirely. As the Carlsberg saga shows, nobody is safe from nationalisation while a decision is still pending.
More on private equity
I loved this chart from the redoubtable Simon French of Panmure Gordon
While discussing the paltry valuations ‘commanded’ by UK plc. It explains why all companies want to list in the US which creates a virtuous circle of investors, liquidity, higher valuations and more everything.
Just this morning Ten Entertainment was taken over at a 33% premium to its closing price
That’s Ten Entertainment chart for you
El Erian, who has I think massively increased his credibility in the last few years with his calls on inflation
He warned that the Fed needs to recover its credibility on forward guidance with the markets or the recent “tremendous loosening of financial conditions” will undermine its policy.
“I do believe the Fed is done raising rates, but I don’t think that validates what is in the markets about rate cuts next year,” he said. “They still have a significant communication problem and they still have a credibility problem.”
“The whole point of forward guidance is for the markets to listen to you and for the markets to do the heavy lifting for you. What we’re seeing now is forward guidance, as we saw last Friday, is being completely ignored by the market.”
Right, ten minutes remaining
Just enough time for Dario to select his latest villain of 2023 and me to highlight a hero of mine and another top ten wine rec
So, Dario: your villain is?
You’ll find no shortage of people disparaging the man
I can’t help but admire someone who has so tenaciously clung to power while being the most unpopular of all Spanish elected leaders – smallest number of votes cast for him
It’s no wonder Spanish netizens have started favourably comparing him to Frank Underwood
But because Spain is my country, he’s on this villain list. But only at number 9. I don’t mind you that much, Pedrito
You’ve kept your hero suspiciously secret
My second hero of 2022 is … daramatic drumroll, tarantara of trumpets…
is..
George Santos!
And the real establishment, not a metaphor for it
And lost quite badly
And he probably ends up in the slammer where I’m not sure he’ll go down too well
If you’ll pardon the expression
He put on a great show of defiance and when most members of congress are ridiculous but deny it, he seemed refreshingly open about his all-too-human propensity to try and fail.
He lived his life like a scandal in the wind…
watch this afterwards from SML – vg
One minute left for Wine No3 of Top 2023 wines…
There are no Grands Crus in Pommard, Burgundy, but this is priced and tastes like one
I actually tasted with the winemaker Benjamin Leroux about fifteen years back and when this was launched in 2011 I was in the rare position of actually having some money and bought three magnums.
My son turned 21 this June 1st, a cloudless, sun-baked high-summer day and we drank this with close friends over my burnt barbecue offerings.
Life’s all about memory and loss on day when your little boy becomes a fully-fledged adult and you lose him, it’s a consolation of sorts to have the memory encapsulated in the empty bottle.
@marks – thx for the brightwell link yest, v interesting
On that wistful note, nunc tempus taciendi
11:32 DGG: Sayonara