2023-09-19 07:01:11
It was to be expected that yesterday was a very wait-and-see day and today will not be any better, unless you have placed microphones in the FED meeting room. Fortunately, Europe kept us a little busy as Société Générale was dismantled to start the week, but for the rest; everyone is doing incantations to know Jerome Powell’s intentions. And to be very frank, we are going to say that we still expect a very consensual speech which should not traumatize the markets. And anyway, we are so confident that nothing can happen to us, that nothing will happen to us.
Audio from September 19, 2023
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Expectations, more expectations
As for the FED, we all spent the day in coffee grounds trying to anticipate what might happen tomorrow evening. It seems obvious that no one knows anything and that everything that is said is just “speculation”. However, a few hours before the deadline which is once again supposed to change our lives, the market seems to have agreed on the fact that we should not expect major maneuvers tomorrow evening, that the rates should stay where they are and that what Powell says will just be a remastered version of what he said in Wyoming at the end of August. He should do everything not to get angry with anyone and not disturb – play the good Swiss, in short – the boss of the FED should suggest that he could still raise rates by the end of the year .
Which would be consistent with his intentions to maintain pressure on inflation, only things we already know. On the other hand, where the boss of the FED will be expected to turn the corner, it is on the subject of the “rate cuts” to come in 2024. If he leaves the possibility that this could eventually happen, it is a good news – if he kicks in and says “we’ll see”, we could bear with it and take it as good news – on the other hand, if he tells us that we can scratch for a rate cut in 2024; I’m not sure it’s going well. But the probability of him making an announcement like this is so improbable – since he doesn’t know where we’re going either – that it would be science fiction…
Aside from the wait
While everyone was refining their opinions and expectations for tomorrow evening, the management of Société Générale decided to announce its strategy for 2024-2026. So before going any further, I must say that I am fascinated to see that a bank (like all banks) which tends to ride the wave and live from day to day, has the desire to come on a podium to explain to everyone what they are going to do in the next three years, when they don’t even know what they will do tomorrow.
The fact remains that they still decided to embark on the exercise and I sincerely think that they would have been better off keeping quiet. I could be wrong, but giving a presentation on the future strategy and taking 12% in your teeth, that already gives you an idea of the strategy and overall, you don’t know where you’re going. In short, Soc Gen started the week with a bang and brought the CAC with it. That’s good, because it will have at least given us things to talk about, otherwise I wouldn’t have even managed to complete this first page of the column.
Not even afraid
For the rest, there were still three subjects that monopolized the attention of traders. The first is the fact that the “fear index” – in other words: volatility is still in a deep coma. This thing is of concern to more and more people on Wall Street as we face more and more unknowns in the market and the global economy, volatility refuses to rise in the slightest. We talked about it quite a bit yesterday and the final conclusion is that the speakers are SO confident in the solidity of American businesses and in the fact that there will be no recession in the next two years, that there will be no no rationale that would justify wanting to protect your wallet. For a market that has failed to see beyond three days in months, I have to say I’m impressed.
One of the other things that will also have attracted the attention of traders is oil. While no one has given anything to do with it for months – especially since it’s been going up, suddenly we notice a fairly massive resurgence of interest in the thing. We’re starting to talk about $100, we’re starting to say to ourselves that “it won’t go down anymore” and yesterday, even the CEO of Chevron came to tell us that the barrel WAS GOING to $100, but that there was no problem because the US economy could more than support it. The guy went from CEO of one of the biggest oil companies to analyst and economist in the same day. Personally, I don’t know if the economy can handle it, but what I do know is that a $100 barrel can’t hurt Chevron’s profits and shareholders. On the other hand, when it comes to the economy, I am less sure. On the other hand, there is something that is starting to bother me, and that is that everyone is going bullish when we didn’t want to believe it just three months ago. So even though everything is pointing in an upward direction, I’m starting to think that maybe it’s time to turn around and become contrarian – you can take a look at today’s chart from SAMT, it might give ideas. The link is HERE
Today’s downgrades
For the rest, once we had gotten over the subject of oil, the FED and volatility which does not want to rise, we were able to concentrate on the two “downgrades” of the day. First of all there was Goldman Sachs which turned “cautious” on Tesla, estimating that successive price cuts could hurt margins – no joke?? We didn’t see that one coming. And then there is also an American investment bank, but not Goldman Sachs which initiated coverage of ARM with a SELL recommendation. It begins well. We will also note that yesterday evening the pricing of the other fashionable IPO took place, that of Instacart which will be listed for the first time this evening in New York. The issue price was set at $30.
This morning in Asia, Japan is down 0.95%, Hong Kong is doing nothing and neither is China. Oil is still strong and is trading at $91.28, gold is at $1953 and Bitcoin is at $26,850.
News of the day
As for the news of the day, we will have to remember that on this Monday, September 18, 2023, Nouriel Roubini returned to bring his strawberry to announce to us that he was going short on the market for the end of the year. Betting on a 10% drop. The guy has become so wrong in the long term that now he’s starting to make calls for the next three months. In six months he will launch into trading signals and in a year he will launch into high-frequency trading. Otherwise, we will remember that the prices of olive oil have exploded by 100% recently – this will surely calm inflation and if ever I have three 5 liter cans to sell if there is any ‘interest.
Meanwhile, U.S. automakers are under pressure from a continuing strike by automakers. The Americans found their F-35 wandering in the sky without a pilot. Trudeau attacks the Indian government over the assassination of a Sikh leader. And Yellen was on TV yesterday to announce that she was not afraid of anything regarding a possible US government shutdown. As she had shown herself to be confident about the non-recession to come and the non-crisis of the debt ceiling. After all, since Mrs. Yellen knows everything, I don’t even see why we’re thinking, just ask her.
Figures of the day
As for today’s figures, in super-interesting news, we will have the CPI in Europe, just to procrastinate on the future of rates according to Lagarde. Then in the USA there will be new building permits, plus construction starts. And then the FED will start its meeting and the clock will start ticking until tomorrow evening.
For the moment, the futures are unchanged and I am going back to bed until tomorrow evening. Have a great day and see you first thing tomorrow, between naps. May the strength of the FED be with you.
Thomas Veillet
Investir.ch
“Don’t walk in front of me, I may not follow. Don’t walk behind me, I may not lead. Walk beside me and be my friend.”
– Albert Camus
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