Australian (ASX) Stock Market Forum

June DDD

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So May is (pretty much) in the books now:

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The Indices:

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All 3 look stretched and ready to roll over.

Top 3

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Bottom 3

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Seasonality

Screen Shot 2024-06-01 at 7.28.46 AM.png

June typically is an up month, but only very marginally: 0.6%.

With everything chartwise looking horrible, I think June could be ugly.

jog on
duc
 
The June Bulls:

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What's coming next week:

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Some history:

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No one worried about a recession:

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Small Cap debt:


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I'm not so sanguine about the market:

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The USD is building strength. USD up everything except Gold down.

Sure Yellen wants the USD down and has been actively trying to push the USD lower. To an extent she has been successful. Successful in delaying the seemingly inevitable.

So: https://www.bloomberg.com/news/arti...er-path-for-rates-boosts-need-to-lift-revenue

The chart from the article:

Screen Shot 2024-06-02 at 7.03.09 AM.png

For this chart to remain flat, as above, then GDP growth must consistently be ABOVE INTEREST RATES.

Why is this an issue?

Because with US debt at 121% of GDP interest payments MUST continue to rise as a % of GDP.

So, to keep the above chart flat, nominal interest rates must be lower than nominal GDP growth. With interest costs growing at a compounded rate, how exactly do you keep nominal GDP moving higher at the necessary rate? Well you can't. Which means essentially some form of YCC.

Which is of course incredibly inflationary. And if you are stupid enough to hold bonds means that in real terms you lose money going forward.

Higher inflation = weaker USD. Which is of course where we came in. That is longer term. Currently the USD is looking rather too bullish for my liking vis -a- vis stocks, which could well take a tumble.


jog on
duc
 
And if you are stupid enough to hold bonds means that in real terms you lose money going forward.

have very little exposure to bonds and that is managed by a ILC i hold ( which actively manages mixed assets )

unlike my exposure between 2011 and 2017 ( which all matured or were redeemed early )
 
Higher inflation = higher for longer rates = stronger USD for longer especially as Europe starts to cut


The issue is real rates as against inflation.

The US cannot afford real rates above inflation. Therefore real rates will be below inflation. Which means a weaker USD over time. That does not however a preclude a stronger USD currently.

jog on
duc
 
Starting with Mr fff:

Update on Trading Session​

Dr. Fly Mon Jun 3, 2024 12:55pm EST 2 Comments


We have numerous trading halts and the NYSE was broken for much of the morning, post $GME ramp. Since mid morning we’ve been diving lower and I have been trading frantically in an effort to stem the tide. My gains have been reduced from +0.75% to 0.3% and I am trying my best to be patient. However, the plunging nature of the market makes it difficult, with the down now off by more than 400. We went from risk aversion off to risk aversion on to collapse. The varying degrees of trickery are at play here and in abundance.

Nevertheless, I remain hopeful we can stabilize into the waning hours and produce something less than disastrous here. There are plunging bond yields coupled with plunging oil prices and cataclysm in the markets. If I didn’t know better, I’d say markets were pricing in a slower than expected economy, which only makes sense if you take the PMI numbers seriously and ignore earnings reports at $NVDA, $DKS, $BBY and other quarterly beats.

To make sense of my trading session, I will list my buys and sales here and open positions.

Opening positions were liquidated:

BITX sold 47.96
QCOM sold 209.9
TSM sold 156.56
TGT sold 151.93
BAC sold 39.98
HD sold 331.51
FAST sold 65.97
ADM sold 61.95
EBAY sold 53.98
RTX sold 107.66
BJ sold 87.3
HAL sold 36.5
BOOT sold 122.37
EXPE sold 114.23
CL sold 92.35
ULTA sold 391.4
KHC sold 35.21
Day trades
b byon 15.73
s byon 15.77
b sq 64.44
s sq 63.98

b tjx 104.63 open
b regn 997.23 open

b qsr 69.77 open

b se 68.68
s se 69.32
b bynd 7.88
s bynd 7.74
b okta 90.57
s okta 89.27
b fslr 276.67
s fslr 279.38

b mrk 128.65 open
b uvix 6.38
s uvix 6.51
b uvix 6.47
s uvix 6.63

b apd 270.47 open
b lly 831.95 open

b biib 232.25
s biib 228.34

b kmb 135.36 open
b etsy 64.39
s etsy 65.13

b meta 478.67 open
b hood 21.61
s hood 20.84
b lh 197.72
s lh 195.29
b mu 127.16
s mu 125.79

b fslr 281.22 open
b tza 18.18
s tza 18.49

b sqqq 10.18 open
b sqqq 10.23 open


b soxs x2 28.77 open
b sq 64.33 open
b etsy 65.38 open
b duol 197.19 open
b pm 102.16 open
b bitx 45.34 open



b byon 15.65
s byon 15.51

b lot 10.09
s 1ot 10.40

So some pretty frenetic trading by Mr fff.

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Now if you had had 'stop losses triggered', would they be in such a hurry to fix your trade?

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It seems that it is the 'big Options' bet that is being focussed on: inasmuch as: what if he exercises them?

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More shenanigans with the banking system.

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The debt in 1980-1999 was lower (though rising) at this time than it is currently. Currently at WWII levels without the manufacturing base (that belongs to China now).

Also, the 1980 to 1986 period was a massive recession. Probably at it's deepest in 1982. Today, so we are told, the economy is booming. Unemployment is at its lowest, etc, etc.

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Interest rates were also in real terms largely negative. When they turned positive, they started to cut them.

Today the debt is multiples higher.

The 'inflation rate' today bears no relevance to the inflation rate of the 1970-1990 period as how it is actually calculated is so different. Today everything that can show inflation is excluded.

Mexico elects a new government. Everyone is now freaking out that stuff will be nationalised: mines (silver/gold), oil, etc. I guess we'll find out.

jog on
duc
 
What happened today?

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Bit of a crazy day with Crazy Kitty, BRK-A going to zero and Mexico tossing the toys out of the pram.

Waiting to see what tomorrow brings.

Last word to Mr fff:

Screen Shot 2024-06-04 at 6.30.28 PM.png

jog on
duc
 
Oil News:

Combining an in-person meeting in Riyadh with a hybrid online option for smaller producers, OPEC+ has agreed to extend existing production cuts into next year, whilst also paving the way for a gradual unwinding of most curtailments.

- The last round of voluntary production cuts agreed in November 2023 are set to be phased out over a 12-month period, lifting OPEC+ collective target to 36.27 million b/d, more than 2 million b/d higher than current output.

- The UAE was the big winner of the OPEC+ meeting, having secured another upgrade to its official production quota, allowing it to ramp up output by 300,000 b/d in several steps throughout 2025.

- Even though Saudi energy minister Prince Abdulaziz bin Salman maintained that OPEC+ has the choice to pause or even reverse the upcoming relaxations, the market at large saw it as a sign of more supply in a period of uncertain demand.

Market Movers

- The shipping arm of ADNOC, the national oil company of the UAE, has agreed to buy UK-based shipowner Navig8 for $1.5 billion, taking over a fleet of 32 tankers and the operatorship of six shipping pools.

- US midstream major Energy Transfer (NYSE:ET) has agreed to buy Midland-focused pipeline operator WTG Midstream in a deal valued at $3.25 billion, including a $2.45 billion payout in cash.

- Japan’s largest gas supplier Tokyo Gas (TYO:9531) is seeking to invest into US natural gas assets, building on its recent $2.7 billion purchase of Rockcliff Energy and its 49% farm-in into trading firm ARM Energy.

Tuesday, June 04, 2024

The OPEC+ meeting over the weekend extended voluntary production cuts into Q3 2024 and the original 3.66 million bpd cuts until the end of 2025. That pledge was not enough to persuade market participants that the future of oil is bright, with Brent shedding almost $3 per barrel in just one trading day and sliding below the $77 per barrel mark. With the promise of more supply coming back to market in 2025, the list of bullish factors out there has shrunk to a bare minimum.

OPEC+ Extends Voluntary Production Cuts to Q3. Swiftly organizing an in-person meeting in Riyadh, OPEC+ members agreed to extend the 2.2 million b/d of voluntary cuts until the third quarter of 2024, whilst also charting the course for a gradual relaxation of remaining cuts into 2025.

Norway Outage Sends European Gas to 2024 Highs. European TTF gas futures soared to their highest this year so far, at €37 per MWh, after Equinor's (NYSE:EQNR) offshore Sleipner hub halted operations due to a crack, also prompting a shutdown at the Nyhamna processing plant.

Nationwide Strike Paralyzes Nigeria’s Industry. Nigeria’s main labor unions have shut down the country’s power grid and halted flights across the country as they demand a 1500% increase in minimum wage amidst unprecedented inflation, so far sparing the country’s oil production.

Hedge Funds Come Back to Oil Speculation. After six straight weeks of shorting their positions, portfolio investors have ramped up their net length held in the six main oil futures and options contracts in the week ending May 28, mostly by closing out their shorts ahead of the OPEC+ meeting.

South Korea May Have Found Oil. One of the most import-dependent countries globally, South Korea has approved exploratory drilling for potentially huge oil and gas reserves off the country’s east coast, with KNOC leading the appraisal that could unearth as much as 14 billion boe.

Exodus of Oil Majors from UK North Sea Continues. Global oil majors Shell (LON:SHEL) and ExxonMobil (NYSE:XOM) are nearing an agreement with independent UK producer Viaro Energy to sell their jointly-owned gas fields in the southern North Sea for $0.5 billion, ending Exxon’s 60-year presence in the country.

Indonesia Postpones Copper Concentrate Export Ban. Indonesia, one of the largest copper producers globally, has postponed the start of a ban on its copper concentrate exports until the end of 2024 due to delays in the construction of smelters, potentially deflating copper prices into the summer.

US Resumes Buying Oil for SPR. The US Department of Energy has resumed purchasing 3 million barrels of oil for the country’s Strategic Petroleum reserve, buying at an average price of $77.69 per barrel for November delivery, taking the repurchased total to 38.6 million barrels.

Sheinbaum’s Landslide Victory Worries Mexico’s Oil Industry. The landslide victory of Mexico’s president-elect Claudia Sheinbaum will allow the ruling party to officially dismantle the 2013 energy market liberalization by changing the constitution, capping future oil production growth in the country.

Indian Heatwaves Ratchet Up Gas Consumption. As heatwaves across India have claimed dozens of lives, the country’s natural gas-based power generation has surged to record highs in May, almost doubling year-on-year to 4.7 million KWhr, all the while coal still accounts for 75% of generation capacity.

China’s Emission Rules to Cap Fuel Demand. Beijing is set to mandate a 5% cut from 2020 levels of carbon emissions intensity by the end of 2025, removing purchase limits on non-fossil-fuel cars and boosting the electrification of industrial vehicles, capping growth in gasoline and diesel demand.

US Oil Major Takes Venezuela to Court. A court in Trinidad and Tobago has granted US oil major ConocoPhillips (NYSE:COP) the right to enforce a $1.33 billion claim against Venezuela for the appropriation of its oil and gas assets, potentially derailing the development of offshore gas fields such as Dragon or Cocuina-Manakin.

Australian LNG Comes Back in Force. US energy major Chevron (NYSE:CVX) has resumed LNG production at its Gorgon liquefaction facility on Australia’s Barrow Island after a mechanical fault prompted a halt in operations for a month, bringing back 5.2 mtpa of output capacity.

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Massive re-shoring. Good for the US long term. Highly inflationary in the shorter term.

Mr fff:


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To be competitive the USD needs to revalue lower (inflationary see first charts). On a PPP basis using electricity, the USD is +/- 75% overvalued as against the CNY.

With the US electrical infra-structure so badly underpowered by huge new demands, rebuilding will be a priority, but massively inflationary.

Of course the 'inflation' helps reduce the debt burden. Negative real rates are required for an extended period, 10yrs+.

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Meanwhile the chop continues.

On balance, I still feel that the bears may yet prevail within the indices. If we do move lower it will be a slow grind lower, not a free-fall. These types of market are unpleasant to trade as your positions are constantly stopping you out with no follow through or trend developing. Mostly better just to sit out and wait for a trend to develop.






jog on
duc
 
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So on this data we have the consumer 'earning more' and very comfortable, while CC debt defaults are rising.

Add that to the falling XLY data:

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Of which AMZN is a significant holding and I would guess pretty representative of discretionary spending.

Which set of data do you believe?

Bond Bulls are back!

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CEO of NVDA: LOL

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Mr fff:

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Last, but not least:

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Bond bulls, Stock bulls, all still dreaming the dream of lower interest rates.

Rather than rates falling, we could see oil rising (to close the gap) or is that just my bias?

jog on
duc
 

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Yesterday was the first time ever that three US companies ended the day with market caps of more than $3 trillion. Notably, the combined market cap of $9.2 trillion for the three largest stocks (MSFT, NVDA, AAPL) is roughly the same as the combined market cap of the smallest 350 stocks in the S&P 500.

Additionally, if all you own is an S&P 500 index fund, 20% of your portfolio is now in Microsoft (7.0%), Nvidia (6.7%) and Apple (6.3%). If you only own the Nasdaq 100 ETF (QQQ), 25% of your portfolio is in those three names. MSFT (8.5%), NVDA (8.2%) AAPL (8.1%). Are you diversified?

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Yesterday's monthly Job Openings & Labor Turnover Survey (JOLTS) saw the number of job openings miss estimates by 3.5%, falling to 8.06mm with downward revisions to March. Other metrics were weak as well.

Another notable development is the steady drop in the ratio of openings to unemployed workers. This ratio has been cited regularly by FOMC Chair Powell as an indicator of still-tight labor markets. As shown below, though, the ratio has fallen from a recent high of 2 to 1 down to 1.2 (rounded), which is the same level that prevailed in 2019.

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Tech sector's 10-day advance/decline line is actually right near oversold territory, so the last two weeks of trading for Tech hasn't been all that great. The percentage of stocks in the sector that are trading above their 50-day and 200-day moving averages has been trending lower as well.

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Off to work.

jog on
duc
 
Oil News:

Friday, June 07, 2024

The oil markets got their breath back after the Monday sell-off saw WTI plunge to $73 per barrel, with Saudi Arabia and Russia insisting that the gradual return of crude to the markets should be seen as a positive signal rather than a bearish one. The interest rate cut of the European Central Bank has provided some macro upside to prices, raising the hopes for a potential Federal Reserve interest rate cut in September.

OPEC+ Ministers Defend Extension of Supply Cuts. The energy ministers of Saudi Arabia, the UAE and Russia have defended the extension of OPEC+ production cuts into Q3, saying they could pause or reverse policy if needed and lashing out at Goldman Sachs for calling the new deal ‘bearish’.

Texas Revives Grand Plan for New Refinery. Element Fuels Holdings, a Dallas-based startup, has revived plans to build a 55,000 b/d capacity refinery in Texas, the first greenfield refinery to be built in the US in nearly 50 years, seeking to process naphtha feedstock into gasoline.

US Could Speed Up SPR Replenishments. US Energy Secretary Jennifer Granholm stated that the United States could expedite the rate of replenishing the Strategic Petroleum Reserve as underground storage sites return from year-long maintenance and WTI remains below $79 per barrel.

Exxon’s LNG Megaproject Gets Delayed. The official launch of the $11 billion Golden Pass LNG project, co-developed by US oil major ExxonMobil (NYSE:XOM) and QatarEnergy, has been delayed by at least six months to mid-2025 following the bankruptcy of Zachry Holdings.

Brazil Seeks Billions from Iron Mining Majors. The government of Brazil has presented a claim towards iron ore giants BHP (NYSE:BHP) and Vale (NYSE:VALE), demanding that their JV Samarco pay $20.75 billion as reparations to be paid across 12 years for the 2015 Brumadinho dam collapse.

Taiwan Wants a Part of Qatar’s LNG Expansion. Taiwan’s CPC Corporation signed a deal with QatarEnergy to purchase a 5% interest in one of the 8 mtpa trains of the North Field East expansion project, simultaneously inking a supply deal for 4 mtpa of LNG over a period of 27 years.

Suriname Readies for First Oil Project. The South American nation of Suriname might finally see its first ever FID after TotalEnergies (NYSE:TTE) and APA Corp (NASDAQ:APA) vowed to make a final investment decision in Q4 2024 on the 700 million-barrel Sapakaru-Krabdagu production hub.

India Eyes Larger Shipping Role. India has grand plans to set up a new shipping company, to be jointly owned by state-run oil companies, that would allow it to expand its maritime fleet by at least 1,000 ships in the next decade and capture a larger chunk of commodity trading.

Sudan’s Refinery Bombed by Rebel Militia. Sudan’s 100,000 b/d Khartoum refinery has been bombed again following heavy fighting between the government army and paramilitary Rapid Support Forces, debilitating the country’s product supply as it relies on South Sudan for diesel.

Venezuela’s Oil Production Growth Defies Sanctions. Thanks to plentiful condensate and improving drilling activity, Venezuela reported a 4% month-over-month increase in crude production as it reached 911,700 b/d, defying the recent snapback of US sanctions.

BHP Struggles to Quash Threat of Chile Strike. Australia’s mining giant BHP (NYSE:BHP) has started government-mediated talks aimed at preventing a strike of more than 1,100 workers at its Spence copper mine in Chile, accounting for slightly more than 1% of global supply.

Citgo’s Assets Might Be Up for Grabs Soon. As next week will see the final round of the Citgo Petroleum marketing process held by a US court in Delaware, several candidates eyed its 167,000 b/d Corpus Christi refinery in Texas, with ConocoPhillips and Koch Industries both reported to be interested.

Clean Energy Investment to Soar to Record Highs. The International Energy Agency expects global investment in clean energy technology and infrastructure to reach $2 trillion this year, twice as much as fossil investments in 2024, with China accounting for $675 billion out of that total.

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So the general consensus is for lower inflation and lower rates. Bonds are catching a bid, well until today, when they jack-knifed higher again triggering a lunch-time sell-off in stocks.

The consensus sees lower oil prices. There have been numerous articles re. electricity issues due to big Tech. AI sucking up available supply. Yet energy prices remain low and supply constricted going forward.

pg. 2
 
AI and Robots: https://interestingengineering.com/innovation/naver-headquarter-robot-run-starbucks and https://www.techtimes.com/articles/...nd-100-service-robots-move-fulfill-orders.htm

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Productivity enhancements. It's happened before:

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So is the market pricing in low inflation because when China joined the WTO tremendous deflationary forces were unleashed masking the monetary inflation that was ever present.

Debt is also exponentially higher today.

Interest rates are compounding the debt at a far higher rate than real GDP growth. So rate cuts are a must at some point. As usual, the Fed have mistimed their actions, likely due to political interference and influence.

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Returning to the 'electrical' issue:

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The % of EV's in the US is laughably low. What if it increased to a significant %? The US grid would collapse.

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The Yen 'Carry' trade has been a thing for decades. The concept seems straightforward, in actuality, it is more nuanced than indicated. However, notwithstanding that, currency imbalances are a real risk. A strong USD is a problem for all who rely on energy imports, particularly Japan.

A very choppy market currently:

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As compared to the projected performance:

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Now the above projection is based on a fairly mechanical system of probability. It tends to work in a trending market. Obviously the conclusion is: this is not a trending market based on the major sectors. The 'market' is also distorted by the overweighting of the humungous mega-caps: MSFT, NVDA, AMZN, GOOG, FB (see earlier chart).



Going forward into next week, I'll compare my firms projected sector analysis to my own.

jog on
duc
 
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