September 17, 2023

Oil Hits 2023 Highs on Tight Supply Outlook

📰 News Organizations

  • Oil Hits 2023 Highs on Tight Supply Outlook. Oil rebounded with Brent crude topping $93 a barrel for the first time this year, as expectations of a tighter supply outlook for the rest of 2023 overshadowed weaker economic growth and rising U.S. inventories.

  • Instacart Aims for Valuation of Up to $10 Billion in Upcoming IPO. Instacart raised its initial price range to between $28 and $30 per share in a regulatory filing Friday. Instacart plans to offer 22 million total shares when it debuts on the Nasdaq.

  • Euro Set for Record Run of Losses as ECB Seen Done Raising Rates. The currency fell for a ninth straight week, the biggest run of declines since it was created over two decades ago. It’s down 5.6% against the dollar after peaking in mid-July.

  • Planet Fitness Shares Tumble After Board Ousts Longtime CEO. The board felt that now was the right time to transition leadership. The company said that Rondeau’s departure wasn’t the result of any unexpected financial event and that he will remain in an advisory role.

  • Maersk Is Seeing Tentative Signs Of A Bounce Back In Global Trade. Maersk says the consumers in the U.S. and Europe have been key drivers in this demand uptick and the upcoming pickup would be fueled by consumption rather than inventory correction.

🐦 Twitter

  • Markets clawing back the rate cuts that were priced for 2024 — in July 150bps of cuts were priced, now we’re down to 100bps. My guess is in next week’s dot plot the Fed will pencil in 75bps of cuts for 2024 rather than 100bps. Source.

  • Consumer goods portion of PPI #inflation has started to reaccelerate. 3-month annualized gain has shot back up to +15.3% (in upper end of range relative to history). Source.

  • A net 51% of US Banks are now tightening their lending standards, the highest since 2020 and at levels that have coincided with recessionary periods in the past. Source.

  • On one hand, the Arm IPO was deemed a success for SoftBank’s beleaguered tech-investing efforts. On the other, Masayoshi Son left so much money on the table to make it a success that the whole effort could be viewed as a $100 advertisement. Source.

  • Treasuries are no longer the safest alternative. In fact, for the first time in 45 years, US Treasuries now have higher downside volatility than gold. This is where gold, commodities, and overall hard assets are poised to play a significant role during this transitional phase. Source.

  • Crude oil prices are booming Now up 34.5% since late June. The OPEC+ (Saudi/Russian) production cuts are the easy culprit to blame for higher prices. They do matter. But another equally important factor is booming demand. Source.

Seasonality doesn't exist for major asset classes. The dynamics at the time matter much more than any possible impact of the season. Any observed outcome is most likely noise (some months worse by chance).

Bob Elliott

📓 Online Publications

  • Industrial Production Increased 0.4% in August. Industrial production increased in August to 103.5. This is above the pre-pandemic level. Industrial production was above consensus expectations, and the previous months were revised up.

  • Adobe Stock Fell Despite Its Earnings Beat. Although the $5.0 billion midpoint of the company's sales guidance for the current quarter is in line with analysts' estimates, investors were hoping for an even stronger outlook because of AI.

  • Vacation Home Demand Near 7-Year Low Due To Costs, Employer Policies. Mortgage-rate locks on second homes were down 47% from pre-pandemic levels in August as market factors have made owning a second home more costly and complicated in the last year.

  • Why Housing Prices Are Getting More Expensive. Housing prices have risen because of supply and demand dynamics but also because they’re higher quality and the fact that so many people are paying attention to desirable locations and amenities.

  • Active Inventory Declined, With For-Sale Homes Lagging Behind Year-Ago Levels By 5.1%. This past week marked the 12th consecutive decline in the number of homes actively for sale compared to the prior year.

🎧 Podcasts

  • Auto Workers Launch Historic Strike. The United Auto Workers union initiated a strike against GM, Ford, and Stellantis, after missing a contract deadline. It has the potential to become the second-largest work stoppage in 25 years, after an ongoing writers' strike. Source(1:41)

  • Arm Fuels IPO Market. Arm’s stellar opening day is expected to fuel confidence in the IPO market more broadly. IPOs for grocery delivery app Instacart and marketing software group Klaviyo are expected to provide a further test of investor appetite next week. Source(0:53)

  • Rate Cuts Expected in 2023 for 2024 Stability. Mikael Sarwe foresees rate cuts next year for stability in 2024, pending evidence of a significant recession, especially in the U.S., before embracing a bond-friendly environment and rally. Source(2:37)

  • There is No Smooth Transition. David Rosenberg says a crucial mistake is to expect a smooth transition from a soft landing to an economic contraction, similar to the situation in 2007. The prolonged delays in economic responses, attributed to fiscal stimulus, are anticipated. Source(3:06)

  • Debt Issuance Threatens Bond Market. Raoul Pal warns of a disconnection between bond yields and economic factors due to extensive debt issuance, potentially endangering the bond market. He suggests the Fed is likely to target inflation through interest payment monetization and rate cuts. Source(3:26)