YOUR QUIVER | December 13, 2022 Today's RundownCIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets. CPI PrintLots for the doves to love. US Nov CPI softer for both headline (+0.1%) and core (0.2%) versus expectations for both at 0.3%. Up 7.1% y/y but down from 7.7%. Fuel, energy services, used cars, and airline fares were down. Apparel was only up a bit at 0.2%. Food away from home, which up, was only 0..5% versus 0.9%. Thus, investors are betting for a 50bps hike tomorrow with less hawkish language. ASR out this morning calling it the third Bear Market Rally, warning about jumping onboard today’s risk asset rally and recommending to stay Defensive. Overnight ActionAsia-mixed with Hang Seng +0.7% and Nikkei +0.4%. Both the Shanghai Composite and the Korean KOSPI were flat. European equities were up, aided by US index futures popping. UK’s unemployment rate rose to 3.7%, showing signs of cooling labor. Germany’s CPI met expectations of 10%. WTI back up. Natural Gas too. Heck, Gold is up as well. Everyone wins (except for UST yields). Bad Boys Bad BoysWhatcha gonna do, whatcha gonna do when they come for you? Well, for SBF, it was going to be testifying for Congress, but now only John Ray (new CEO in charge of solving this crime) will be the panel witness. CNBC is reporting that the top three guys donated at least $76mm to political causes over the past few years, so it has to be a BIT awkward for some folks in the room, right? The US Attorney for the Southern District of NY ordered SBF’s arrest in the Bahamas. The SEC also filed a 28-page complaint against SBF citing fraud. Congressional webcast here. WTO SmackdownChina is bringing its case against the US and its chip export curbs to the WTO. In Oct, the US introduced rules restricting chips made using American tools from being exported to China. The Chinese Ministry of Commerce charges that the US abused export control measures and obstructed normal intl trade in chips. The US is saying that its actions are in the interest of national security. WTO trade disputes can take years, and there are exceptions for natl security concerns, so analysts expect the US has a strong side here. So now China is considering a support package for its semi industry of > $143bn, per Reuters, with subsidies and tax credits rollable over 5 years. Also, China is looking to South Korea as a potential partner since the US shut the door. The problem is that if the Dutch and Japanese also support curbs, then all the cash will go to domestic suppliers who are behind the curve techwise. In the CloudsBernstein released its Dec CIO survey. They expect IT spending to slow in 2023 (from 6% in ’22 to 3% in ’23) with no 4Q budget flush. Public clouds were a brighter spot in terms of growth, with MSFT and AMZN cited as relative winners for IT spend over the next five years. Marginal Consensus91% of BofA survey respondents expect profit growth to deteriorate. Sounds consensus now. About 69% expect a weaker economy, and inflation concerns tapered off from the prior survey. Relative positioning in equities over bonds at its lowest since 2009. Debt DownMore debt financing was either cancelled or postponed this year than during the pandemic, according to NoSo. Roughly 140 transactions (incl bonds, loans, ABS worth $75bn) were pulled, an amount similar to the combined sum of 2020 and 2021. Modern WarfareTo try to get regulatory approval for the $69bn purchase of $ATVI, $MSFT offered Sony the right to sell Call of Duty as part of its subscription service as a 10-year deal available on its console. Big Boo BooDissolving the Trust and Safety Council isn’t the way to bring confidence to advertisers concerned about hate speech at Twitter, especially when you’re hemorrhaging cash. So, it’s tough to say if all the "boos" hurled at Musk from the audience at the Dave Chappelle show on Sat night in SF were from Twitter ex-employees, political foes, or advertisers. Questionable CallA key BOE official commented that UK housing prices could decline as much as 20% without causing distress to homeowners. Anyone else suspect he rents his home? While his rationale is that the 2mm buy-to-rent owners may sell in the current market since most have interest only loans in a higher rate environment, which would pressure prices, it’s hard to believe that owners wouldn’t be a tad bit upset about losing the roughly 20% gains from the last few years they were expecting. Reassessing ValuesWhile many individuals reassess their values near year-end, they also may start reassessing commercial property values for tax purposes. While muni budgets haven’t been hit yet, we can see this train coming because property tax is the largest expense for most office landlords. With lower revenues/demand for space and higher interest rates, it’s a no-brainer. Per BBG, in jurisdictions that do annual assessments, appeals are up 30-40% versus pre-pandemic. Related intermediate-term concerns are weakened credit and default risk for munis, and lower revenues for schools/cities/etc that will have to start cutting programs and/or people. Lettuce EvolveExtreme weather is driving an increase in high tech ag, according to BBG. Romaine prices are up >50% since Jan 2020, and restaurants are limiting leafy green usage. $UNFI is opening an indoor vertical farm next year in Wisconsin, and there are more than 2k vertical farms in the US. Interestingly, Square Roots can customize production, this evolution can counter weather/drought and energy challenges facing the food supply chain. |