For all the snippets that don’t fit anywhere else.
Macro
I believe bond yields are peaking. The US-10yr is slowly losing upward momentum.
Some of it’s the Fed, but it’s mainly activity. UBS think April will be the peak for inflation. They expect core and headline inflation to be below 2% by year end. The decline in transport reflects lower used-car prices.
High inflation is not a synonym of non-transitory. Indeed, these high prices are likely to lead to lower prices, down the track, on the back of weaker demand. The debate over transitory inflation or not has not been decided.
For instance, in Europe, one-year forward electricity prices are up 4x on the start of 2021. Lower demand is coming. Factories don’t make money on these prices.
Commentary in the US Services ISM Survey said as much with wholesalers highlighting cost pressures are hurting demand, retailers blaming supply chains and public administration impacted by staff shortages.
Commodities
A common theme in the fatalistic end of the market is a complete breakdown in commodity markets. The Credit Suisse strategist Zoltan Pozsar sums it up best:
“central banks can’t print oil”
The argument goes that there is no policy solution to an absence of physical commodities created by fundamental disruptions, such as the war in Ukraine.
New York diesel is the current focus. Current inventories are at 30-year lows. It’s unclear what happens if they run to zero.
Spodumene spot prices seem to have eased slightly but remain high relative to history. This chart from Hartleys shows a gap between Allkem’s contract price and the spot price.
Technology
CNBC is reporting that Facebook is planning to reduce hiring. It’s of a piece with other stories highlighting coming redundancies in Silicon Valley as market valuations fall and venture capital funding runs dry.
Two big thoughts come from this:
it’s good for the winners; more software engineers
tech firms can, and will, massively improve visible EPS, making valuations more attractive
Apparently, Zuckerberg posted this. The more edgy you are, the greater the engagement. Might be a plan!
Everything Else
This image received a lot of engagement. It’s Midtown, NYC on a Monday lunchtime. There are mitigating factors but it’s not New York as I remember it.