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Secretly, these economies are getting crucified
Rate hikes are REALLY biting now
Tim Vollans
October 23, 2023 • Estimated Reading Time: 6 minutes
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🧠 The Big Brain
Rate Sensitive Economies Getting Crucified
The global economy is slowing. Some economies are slowing faster than others.
Yes that line sounds weird. How can something be slowing faster?
It’s also 100% true.
See, some economies are way more sensitive to rate hikes than others, and a couple that we track are giving off “we’re all about to die of poverty, this is gonna be worse than 2008” kinda vibes.
OK. FINE. Not quite that bad, but still seriously concerning.
All in today’s Big Brain, along with that EURGBP trade idea promised on Friday.
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⚡ The Spark
Dr Copper On The Cliff Of Death™
Sometimes I have an irrational hatred of market clichés.
One of these is the idea that copper has mysterious powers to ‘diagnose the health’ of the global economy.
See, it’s just like a doctor. Diagnosing and sh*t.
Hence, the nickname, Dr Copper.
Conspiracy Theory: The nickname was invented by salespeople to pitch mining stocks to wealthy marks doctors & surgeons.
We’re gonna dissect (geddit?) that little nugget in a sec.
First though, if copper is genuinely diagnosing anything, we’re about to be pretty sick:
Scaramouche scaramouche, will you do the... contango?
Honestly, can’t say contango without singing Bohemian Rhapsody.
Thunderbolts & lightning, very very frightening me…
On the one hand, that level of contango is a pretty bad sign in the near term.
On the other, is this a sign that sentiment is deeply bearish and there’s limited juice left to the downside?
WTFink is Contango anyway?
Contango is a situation where the futures price of a commodity is higher than the spot price. Contango usually occurs when an asset's price is expected to rise over time. That results in an upward-sloping forward curve.
Too much of a good thing?: It’s also what we see when the market is near-term over-supplied, but that situation is not expected to persist.
“We are seeing invisible inventories being released onto the exchange”
Not sure how he’s seeing them if they’re invisible…
Anyway, that comment was from the end of September. Not the kind of thing you’ll see in a healthy market.
Worth keeping a close eye on copper now if risk sentiment stabilises.
💡 The Lightbulb
Cold War Cancelled
Whenever things change, there’s usually a rush to predict WHAT THIS MEANS for well, everything.
Especially in markets, where the prize is vast sums of money, or, in the case of those who shout loudest, analyst clout…
And we’ve been told countless times how there’s no way back for the US & China.
Relations getting worse and worse….
Trade wars forever and so on.
What if… that’s wrong?
See, although there’s little doubt that some companies are trying to reshore, friendshore, nearshore or whatever type of shore means “being less reliant on China just in case SHTF….”, the rhetoric hasn’t really escalated for a while.
Sure, there are restrictions on certain types of chips being exported from the US to China, while China’s restricting exports of certain materials including graphite for batteries, but what’s REALLY new?
Everyone knows there are ways around most of these things, and we’ve been wondering if that story is actually on the turn…
Adding to the evidence, a Wang Yi trip to Washington is on the cards this week…
WSJ: China hasn’t said yet whether its leader, Xi Jinping, will accept President Biden’s invitation to visit the U.S. next month, but Beijing is gearing up an American charm offensive that appears designed to prepare the way for what would be Xi’s first U.S. trip in six-and-a-half years.
Xi is expected to dispatch Chinese Foreign Minister Wang Yi this week to Washington for summit-preparation meetings with Secretary of State Antony Blinken, according to people briefed on the plans.
Maybe that Cold War can be postponed for a while…
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@fink.tok #bondyields drive the market, and rhe #yieldcurve is a VERY good predictor of the direction of the #useconomy. But it’s an even better ind... See more
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