Where finance and media intersect with reality


Spot Markets Live Transcript: 12/12/22

Izabella Kaminska 11:00

Hello and welcome to Spot Markets Live and the chaos that is a UK SNOW DAY.

Today I’m joined by Anjuli Davies.

Anjuli Davies 11:01

Howdy and happy snowballs.

And good luck if you were on the M25

Izabella Kaminska 11:02


The UK always grinds to a halt because nobody has snow tyres.

None of this happens on the continent.

First, a quick reminder that I did of course unconsciously choose what ended up being a snow day for the combined “A long time in finance” and “Blind Spot” Christmas drinks gathering:

If you’ve RSVPed already thank you! If you haven’t heard back from me, that’s fine.

I lost track of replies as was ill last week and lost the will to even check my phone.

Better now (thank god!) and I am happy to report we can accommodate all the RSVPers.

So looking forward to seeing you there.

Anjuli Davies 11:04

Also because of the chaos, I have to leave early. So this is just a small fly-by from me really.

Izabella Kaminska 11:04

Yes, sadly Anjuli lives in the sticks so any snow totally ruins her commute.

Anjuli Davies 11:05

Worth checking in on how Europe is handling the deep freeze from an energy standpoint.

Izabella Kaminska 11:05

My cobwebs froze yesterday:

But it looks like this will be the first big test for the power grid.

UK Day ahead power is responding:

And apparently, the incentive offers are already going out to retail users.

Overall, so far everything seems ok. The commodity supercycle may be paused for now.

Oil has got smacked by demand concerns and is now lower than at the start of the year.

Product markets are normalising.

Natty etc have done essentially very little for 2 months. Maybe a slight recovery following the autumn crash.


If the deep freeze is sustained things could change, and what is happening in places like Japan will then suddenly matter a lot as competition for scarce LNG picks up.

So far it seems ok.

Though that’s largely thanks to coal coming back on in a big way:

From the FT:

The UK electricity grid operator has instructed two emergency-use coal generators to start warming up as the network faces its first big test of the energy crisis, with demand across the country soaring as temperatures dip below zero. The National Grid Electricity System Operator said on Monday morning that it had asked the “contingency” plants to prepare for operation “to give the public confidence” in energy supplies, adding that people should continue to “use energy as normal”. The two Drax coal-fired generation units, which the government requested to be on standby this winter, may not be needed to supply power to the grid as soon as Monday, the operator said, but “they will be available to the ESO if required”.

Anjuli Davies 11:08

But hey, it’s all going to be alright because fusion has started working.

Izabella Kaminska 11:08

Oh yeah, I did read about that.

Big if true – providing it doesn’t inadvertently create a black hole that swallows us all up at the same time.

In a significant milestone towards achieving limitless clean power, for the first time ever scientists are believed to have gained more energy out of a controlled nuclear fusion reaction than they put in.

The Lawrence Livermore National Laboratory in California is set to announce the results in shock findings this week, the Financial Times reported.

According to the paper, the scientists used 2.1 megajoules of energy to create the conditions for the reaction, which mimics the process that occurs in the sun, and from that they received 2.5 megajoules.

But that’s a big step forward for humanity if things come of it.

Markets more widely being a bit boring but in the red.

Over on the FTSE, the leader is the LSE and BAE, and of course Centrica, SSE. The biggest losers are Fresnillo, Ocado and British Land.

Anjuli Davies 11:10

The LSE is up on news that Microsoft plans to buy a 4% stake.

Izabella Kaminska 11:10

This is part of a bigger trend of exchanges moving their data processing centres to cloud systems.

As the Guardian reports:

Anjuli Davies 11:10

In November, Google invested $1bn in Chicago-based CME as part of a 10-year cloud computing deal; Nasdaq and Amazon Web Services agreed to a similar partnership last year.

Izabella Kaminska 11:10

This is a fascinating development in general, because of what it stands to do to the high-frequency trading model.

Once exchanges are being processed via the cloud, the upsides of co-locating your servers next to the exchanges will be entirely lost.

Exchanges won’t be able to make additional revenue from offering such access either.

Clearly, they think that the savings from cloud will more than compensate for the lost income from HFTs.

But it will be fascinating in terms of how the HFTs adapt, once speed and quicker access to info flow are no longer available to them. Will they lose their edge?

Anjuli Davies 11:11

It will be interesting to see how the market structure evolves.

Izabella Kaminska 11:12

And liquidity.

Anjuli Davies 11:12

It’s interesting that as part of the deal LSE has to spend £2.3 billion over the 10-year partnership. Who’s helping who here?

Izabella Kaminska 11:12

Well, quite. But there must be a perceived efficiency even if it brings us back to the question of resilience and single point of failure risk.

Arguably, exchanges managing their own servers are also at risk of failure. So, maybe outsourcing to professionals makes sense?

We will revisit this soon no doubt. There are probably unintended consequences we haven’t thought of yet.

Anjuli Davies 11:14

So, The Telegraph has an interview with your pal, Izzy: Nouriel Roubini. He doesn’t want to be called Dr. Doom anymore  – just Dr Realist. But he does basically say we are screwed because central banks are impotent in the face of rising inflation – and the UK is the worst off.

“What have central  banks become when the fig leaf of their independence has been ripped off as debts mount?”

The debate that will continue to rage in 2023 is no doubt over whether the central banks have lost their independence. Roubini says they have “ strayed from a rigorous focus on the long-term picture. Instead, they take cues from politicians and leveraged investors who cater to every wind of change.”

Izabella Kaminska 11:14

Well as it happens I sat down with Nouriel last week for a leaked brunch (between us [REDACTED].)

That avocado toast, well, what can I say?

Anjuli Davies 11:15

Nice product placement though.

Izabella Kaminska 11:15

Nouriel only had tea though. As he was on a whirlwind tour of podcasters and interviewers.

I will process the interview this week and publish it maybe on Thur/Fri.

But I can offer you guys a sneak peek.

I was very curious given his totally doomy outlook whether he has invested in any bunkers.

So I asked about his bunker mindset.

Anjuli Davies 11:16

What did he say?

Izabella Kaminska 11:17

He was very upfront and said that he would rather die in New York, where he lives, as he wouldn’t want to be among the survivors of an apocalypse. He also said that Peter Thiel is a fool if he thinks he will survive in a bunker in New Zealand.

Anjuli Davies 11:17

That all sounds a bit depressing.

Izabella Kaminska11:17

It was, and I have to say my main takeaway is that Nouriel is both very right and very wrong in some ways.

I mostly totally agree with him.

I enjoyed his book and I commend him for being so upfront about stuff that a lot of his peers simply are not upfront about.

Especially about stuff like inflation and the limitations of ESG/Green growth.

Also, he is very clear that if we are to navigate our way through this there’s a good chance our individual freedoms will have to be subordinated.

But at the same time, he doesn’t see this as contradictory vis-a-vis his general stance about populism and the limits of globalisation.

My general conclusion is that it’s all very millenarianist, and there’s a bit of a death cult mentality.

On the one hand, if we don’t react it’s going to be a certain apocalypse. If we do react it will be the end of personal freedom and the rise of an authoritarian hell hole.

Which is basically code for “limits of growth” and the club of Rome theory.

I did try to poke holes, but it was hard to really go deep into the inconsistencies as [REDACTED].

Anjuli Davies 11:18

Have you ever seen the ‘what happened in 1971’ site?

It does make you think.

Izabella Kaminska 11:19

Yeah, it really does!

Published in 1972 but they actually started meeting in 1968.

Nouriel’s Megathreats is basically a sequel IMHO.

Nouriel seems to think the only way out of our predicament is if we achieve mega growth.

But since growth is being curtailed by the mega threats, and – unlike a lot of his peers – he is realistic about the fact that green growth isn’t going to cut it as it’s still zero sum or potentially even negative sum, this is unlikely to be possible. A Catch 22.

Hence enjoy the good times while you can, especially if you have a hot tub.

Anjuli Davies 11:20
Thank God for Fusion!
Izabella Kaminska 11:20

I think there is some evidence NR is living it up, while he can. 🙂

Nouriel Roubini told to remove hot tub from roof of Manhattan penthouse

Anjuli Davies 11:21

But it would be so nice to have a hot tub over the NY skyline

Izabella Kaminska11:21

And to watch the apocalypse unfold while soaking in it 🙂

@bruce – what’s the Navalny stuff?

@RF – Actually a very sound point. Apparently, the first thing to do when you hear the sirens is to pour water into any tub you’ve got to help preserve as much water as you can in an accessible way. Good prepper lifehack that 🙂

Gang, do let us know if there’s anything specific that’s caught your eye this morning.

If not, I thought it might be worth talking about the rebellion against Jeremy Hunt.

Jeremy Hunt is facing a rebellion from 40 Conservative MPs over £7 billion of government spending on “woke” projects.

The MPs have written to the Chancellor to demand that ministers cut spending on equality and diversity measures and grants to charities and quangos in order to reduce taxes.

Anjuli Davies 11:25

The anti-woke campaign gathers force.

Izabella Kaminska 11:25

This is the key bit though:

It comes ahead of the publication of a new report by the Conservative Way Forward group on Monday, which will claim that £7 billion of public money is spent on “politically motivated and divisive activities” each year.

The group’s research is based on an audit of government accounts and Freedom of Information requests to 6,000 public bodies, and will point to spending on equality, diversity and inclusion (EDI) initiatives in government, arms-length organisations and contractors including the company building HS2.

EDI jobs in the public sector cost the taxpayer £557 million a year, the report will claim, while billions are spent on diversity initiatives by quangos including on contributions to a campaign on “unlearning whiteness” by the publicly-funded Arts Council.

So I can’t name names, but I know of start-ups being utterly curtailed by some of this EDI stuff. It does seem to be a total grift. Even if the objectives were sound, the road to hell is paved with good intentions. And what seems to have manifested is a system where to get any govt projects signed off you need to pass a specific EDI score.

But who gets to assess you? Well, that’s the issue. There are only a handful of approved agencies, and there are more projects and private contractors than there are assessors, so these assessments are being done in totally opaque and spurious ways, and those doing them are charging an absolute fortune.

Councils and corps are paying up because if they don’t they can’t get their projects over the line.

In many cases, these are small and medium-sized suppliers. When they can’t afford the EDI assessment, the councils or govt depts offer to pay for them instead.

This then unleashes an unlimited government cash flow tsunami into the sector, only driving up costs – which we the taxpayer end up paying for.

It’s a terribly stupid system.

And it also means that decisions about which projects get to go through and which don’t, end up lying with totally unqualified individuals.

End of rant.

Anjuli Davies 11:32

Bonkers bureaucracy but unfortunately not limited to this sector

Izabella Kaminska 11:33

Forget about Nouriel’s megathreats, what will really bring civilisation down is the bureaucratic state.

I think Douglas Adams was onto this before anyone else.

Should we check in on Home REIT?

Anjuli Davies 11:35

Investment week have written up the latest RNS

The board of Home REIT has denied the claims made by shareholders that it had invested in assets not consistent with its socially responsible investment approach, in an RNS notice today (12 December).

Izabella Kaminska 11:36

Well, there you go. I guess that saga is going to continue beyond Christmas.

Izabella Kaminska
Headline RedBox Commodities
Headline RedBox Commodities
Izabella Kaminska 11:37

Just some flashes for everyone

Anjuli Davies 11:37

Some big M&A news that was telegraphed last night

Amgen to buy Horizon Therapeutics for $26.40 billion

Amgen Inc (AMGN.O) said on Monday it would buy rare disease drugmaker Horizon Therapeutics Plc (HZNP.O) for $26.40 billion in its biggest deal yet, giving the biotech company access to blockbuster thyroid eye disease treatment Tepezza.

Izabella Kaminska 11:38

That sounds like a big deal.

But also, worth flagging Fatih Birol’s comments over the wires now 2023 may be worse than 2022 and that LNG new supply is at a concerning low.

Izabella Kaminska
Headline RedBox Commodities
Izabella Kaminska 11:40

Relatedly Von Der Leyen is making lots of comments about natgas too.

She has also referenced the news about the EU parliament vice president being imprisoned on the back of some Qatar corruption news. Qatar coincidentally being one of the world’s top LNG producers.

This has been a big story, largely missed by the UK press.

Four charged in connection with Qatar corruption scandal at European Parliament

European Parliament Vice-President Eva Kaili and three others were charged and imprisoned on Sunday in Belgium, amid a police probe into alleged corruption linked with Qatar.

Six people have been arrested since Friday in Brussels after investigators made multiple raids based on suspicions of “substantial” money payments by the Gulf state to influence MEPs.

Kaili — a Greek Socialist MEP and one of 14 vice presidents at the European legislative body — was charged with “corruption”. She has been suspended from her party and sanctioned, being withdrawn from duties, such as representing the head of the parliament in the Middle East.

Anjuli Davies 11:42

Nigel Farage having a field day I bet.

Izabella Kaminska11:43

Oh yeah, he put out a little video about it of course.

For me, it’s just more evidence that The Entire Economy is Fyre Festival.

Ok– so we are now going to say goodbye to Anjuli so she can make it through the snow for our Christmas lunch 🙂

Anjuli Davies 11:44

See some of you later I hope!

Izabella Kaminska 11:44

Ciao! And thank you.

I’ve got 5/10 min before I’ve got to go, so I’m going to let the rabble decide what we cover in that time.

@Nightingale in the comments mentioned the Moody’s call about a policy regime change at the BoJ.

I’ve not seen that myself, but I will look into it.


Bloomberg has a related Japanese Bond story:

A dialing back of massive Bank of Japan bond purchases and even a tweak to yield-curve control would fail to solve the liquidity drought in the country’s debt market next year, according to investors.

Only an overhaul of the entire framework of policy easing would lead to a sustainable improvement in the liquidity strains, said Mitsubishi UFJ Kokusai Asset Management Co. A BOJ survey measure of investors’ perception of Japan’s bond market functioning has fallen to a record low.

Speaking of Mizuho, they were out with a report late last week talking down Coinbase revenues

This is due to Coinbase’ growing dependence on income from Circle USDC.

Coinbase CEO Brian Armstrong said on Wednesday that the company’s revenue will be half or less what it was last yearas the exchange struggles amid sharp drops in cryptocurrency prices and continuing ripple effects from multiple bankruptcies this year, including the recent collapse of rival exchange FTX.

The company’s shares have fallen over 80% this year, and the stock has been one of the worst performers on the Nasdaq index.

11:53Some talk about UK rates, and 2-year yields creeping back higher

Which is indicative either of the BoE prepping another coup against the government or well, actually market conditions.

It’s funny though given that there was an actual coup attempt exposed in Germany.

11:56Probably worth finishing on the UK housing market

Rightmove report notes average asking prices are down 2.1% in a month.

The average asking price of homes being put on the UK market has fallen by 2.1% over the last month, according to Rightmove, which said it had seen the largest pre-Christmas dip of the last four years.

The UK’s biggest property website said the average asking price was £359,137 in early December – about £7,862 less than a month previously. The fall in asking prices followed a 1.1% decrease in November’s prices, and will be seen as further evidence that the property market is rapidly cooling.

So it will be interesting to see how the BoE navigates against that. THe next MPC meeting is on December 15.

For now, I’m going to call it a day.

And yes, we will have one last special session on December 19.

And then wrap up on the lives sessions until we start again in January. By which time I may be able to share some important operational news about the Blind Spot.

So thank you all for joining me, and see you next week!

I promise not to puke on anyone tonight.

I am now fully recovered.

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