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Msg  70407 of 70523  at  9/24/2021 9:46:01 AM  by

carswell


The Launch Pad

Richardson Wealth - Connected Wealth
Daily market commentary
The Launch Pad
September 24, 2021
Click here to sign up for the Launch Pad
Today

Investors yesterday managed to put China Evergrande's debt crisis in the back seat and look past uncertainty over monetary and fiscal policy and ongoing debates in Washington over the debt ceiling, leading to equities' best day since July. But just when things were looking up, crypto restrictions coming out of China have hurt market sentiment overnight leading to a fall in equities to wrap up an already volatile week. A crackdown on bitcoin by China has hurt market sentiment overnight, especially with technology shares as China’s central bank said all cryptocurrency related activities are illegal. Overseas crypto exchanges providing services in mainland China are also illegal, the PBOC said leading Bitcoin to drop 5% and ether 9%.

The cost of the intractable semiconductor shortage has ballooned by more than 90%, pushing the total hit to 2021 revenue for the world’s automakers to $210 billion. This equals 7.7 million fewer vehicles being built this year due to the chip crisis, despite ongoing efforts to shore up the supply chain.

Have you gotten used to seeing empty shelves? Supply shortages aren’t just for chips anymore. This Bloomberg Opinion article dives into the grocery stores with data about inventory levels and consumer behaviour. Will we see a toilet paper frenzy again? Who knows, but consumer behaviour, like the irrational run on TP last year, is part of the problem. Meanwhile, paper shortages are hampering shippers and retailers... how many empty Amazon boxes do YOU have piled up in your basement?

The Evergrande situation has investors wondering whether there are more debt debacles ahead. A new study by consultant firm Kearney has found that the number of “zombie” companies has risen 9% over the last decade. Zombie companies are companies that earn just enough to continue operating by covering overhead costs, unable to pay down debt let alone grow. They are fragile and potentially one market disruption away from insolvency. Easy monetary policy has exacerbated the issue of “zombies” by allowing them to inexpensively roll over their debt.


Diversion: If you’re a Justin Bieber fan AND a Leafs fan, you’re in luck. The two have collaborated on some pricey merchandise that several leaf players got a chance to preview. Spezza seemed particularly excited by the socks. Don’t worry Habs fans, Céline may announce a collab with Montreal next.
Connected Wealth™
Tactical model
(% equity weight)

Our tactical fund is designed to complement your existing holdings to minimize portfolio volatility. To learn more, please click here.


Company news

Carnival rose over 4%, exceeding the broader market after the company shared that it expects over 50% of its fleet capacity to be sailing by the end of October and up to 65% by the end of the year. The company has expressed similar optimism in the past, previously noting in the Spring that it expected its entire fleet to be operating “by the end of this year, early next year.” Salesforce shares advanced after the company announced slightly higher revenue outlook for 2022 ahead of its investor day. The company sees its revenue for FY22 to be between $26.25 billion to $26.35 billion and FY 23 sales guidance of $31.65 billion to $31.80 billion. The SNC-Lavalin legal saga was thrust back into the spotlight yesterday after the RCMP announced they have charged two former executives and the engineering company itself for allegedly paying bribes to obtain a Montreal bridge repair contract. Nike's earnings missed as lockdown-related production delays hobbled the efforts to meet strong demand for shoes and athleticwear. Twitter Inc. will let users send and receive tips using Bitcoin as part of a broader push to help users make money from the service.

Commodities

Oil prices steadied this morning and are near a two-month high above $77 a barrel and are heading for a third straight week of gains, supported by global output disruptions and inventory draws. Oil prices have been supported in recent weeks by major disruptions in U.S. Gulf Coast production following Hurricane Ida and other storms, disruptions which could last for months in some cases, that have led to sharp draws in U.S. and global inventories. At the time of writing, NYM WTI Crude futures are down -0.19% to US$73.16/bbl and ICE Brent Crude futures are down -0.12% to US$77.16/bbl.

Gold rebounded this morning after a 1% drop in the last session, supported by a softer dollar and as concerns over the fate of China’s Evergrande which has soured some investor’s risk appetite. Gold Spot is up +0.60% to US$1,753.05/oz this morning.



Fixed income and economics

Records are meant to be broken. And sometimes not necessarily in a good way. The New York Fed’s reverse repo program set a new record yesterday for overnight demand with 77 distinct participants placing a total of $1.352 trillion worth of orders at the facility. It’s a $70 million increase from Wednesday and comes in reaction after the central bank doubled the limit for individual users to $160 billion. The program allows banks, money-market funds and other financial firms to park cash overnight while earning five basis points (yes that is correct) and has become increasingly popular with Wall Street firms flush with cash and seeking short-term havens to stash it. The debt ceiling situation is also fueling renewed talks for the Trillion Dollar Platinum Coin idea that gained sway a decade ago during another debt standoff. Recall that the proposal derives from an arcane piece of law in the U.S. Code regarding minting and issuing coins and medals, which says that coins may be of any notional denomination. That means the U.S. Treasury could mint a platinum coin of $1 trillion U.S. dollar notional value, then deposit that coin into its account at the Federal Reserve. With the account at the Fed now credited up to $1 trillion, the Treasury would then buy back U.S. Treasury bonds to prevent the debt ceiling from being breached (yes this looks familiar as it’s the equivalent of quantitative easing). In any regard, Treasury attention is all the more popular than ever now with the financial logjam at Congress and the big swings we’re seeing daily. Yesterday the long benchmark lost three points to bring yields back below 1.95% and curve flatten to its narrowest since last December.

Chart of the day

Markets

Quote of the day

Keep your face always toward the sunshine - and shadows will fall behind you.
Walt Whitman

Richardson Wealth - Connected Wealth
Daily market commentary
The Launch Pad
September 24, 2021
Click here to sign up for the Launch Pad
Today

Investors yesterday managed to put China Evergrande's debt crisis in the back seat and look past uncertainty over monetary and fiscal policy and ongoing debates in Washington over the debt ceiling, leading to equities' best day since July. But just when things were looking up, crypto restrictions coming out of China have hurt market sentiment overnight leading to a fall in equities to wrap up an already volatile week. A crackdown on bitcoin by China has hurt market sentiment overnight, especially with technology shares as China’s central bank said all cryptocurrency related activities are illegal. Overseas crypto exchanges providing services in mainland China are also illegal, the PBOC said leading Bitcoin to drop 5% and ether 9%.

The cost of the intractable semiconductor shortage has ballooned by more than 90%, pushing the total hit to 2021 revenue for the world’s automakers to $210 billion. This equals 7.7 million fewer vehicles being built this year due to the chip crisis, despite ongoing efforts to shore up the supply chain.

Have you gotten used to seeing empty shelves? Supply shortages aren’t just for chips anymore. This Bloomberg Opinion article dives into the grocery stores with data about inventory levels and consumer behaviour. Will we see a toilet paper frenzy again? Who knows, but consumer behaviour, like the irrational run on TP last year, is part of the problem. Meanwhile, paper shortages are hampering shippers and retailers... how many empty Amazon boxes do YOU have piled up in your basement?

The Evergrande situation has investors wondering whether there are more debt debacles ahead. A new study by consultant firm Kearney has found that the number of “zombie” companies has risen 9% over the last decade. Zombie companies are companies that earn just enough to continue operating by covering overhead costs, unable to pay down debt let alone grow. They are fragile and potentially one market disruption away from insolvency. Easy monetary policy has exacerbated the issue of “zombies” by allowing them to inexpensively roll over their debt.


Diversion: If you’re a Justin Bieber fan AND a Leafs fan, you’re in luck. The two have collaborated on some pricey merchandise that several leaf players got a chance to preview. Spezza seemed particularly excited by the socks. Don’t worry Habs fans, Céline may announce a collab with Montreal next.
Connected Wealth™
Tactical model
(% equity weight)

Our tactical fund is designed to complement your existing holdings to minimize portfolio volatility. To learn more, please click here.


Company news

Carnival rose over 4%, exceeding the broader market after the company shared that it expects over 50% of its fleet capacity to be sailing by the end of October and up to 65% by the end of the year. The company has expressed similar optimism in the past, previously noting in the Spring that it expected its entire fleet to be operating “by the end of this year, early next year.” Salesforce shares advanced after the company announced slightly higher revenue outlook for 2022 ahead of its investor day. The company sees its revenue for FY22 to be between $26.25 billion to $26.35 billion and FY 23 sales guidance of $31.65 billion to $31.80 billion. The SNC-Lavalin legal saga was thrust back into the spotlight yesterday after the RCMP announced they have charged two former executives and the engineering company itself for allegedly paying bribes to obtain a Montreal bridge repair contract. Nike's earnings missed as lockdown-related production delays hobbled the efforts to meet strong demand for shoes and athleticwear. Twitter Inc. will let users send and receive tips using Bitcoin as part of a broader push to help users make money from the service.

Commodities

Oil prices steadied this morning and are near a two-month high above $77 a barrel and are heading for a third straight week of gains, supported by global output disruptions and inventory draws. Oil prices have been supported in recent weeks by major disruptions in U.S. Gulf Coast production following Hurricane Ida and other storms, disruptions which could last for months in some cases, that have led to sharp draws in U.S. and global inventories. At the time of writing, NYM WTI Crude futures are down -0.19% to US$73.16/bbl and ICE Brent Crude futures are down -0.12% to US$77.16/bbl.

Gold rebounded this morning after a 1% drop in the last session, supported by a softer dollar and as concerns over the fate of China’s Evergrande which has soured some investor’s risk appetite. Gold Spot is up +0.60% to US$1,753.05/oz this morning.



Fixed income and economics

Records are meant to be broken. And sometimes not necessarily in a good way. The New York Fed’s reverse repo program set a new record yesterday for overnight demand with 77 distinct participants placing a total of $1.352 trillion worth of orders at the facility. It’s a $70 million increase from Wednesday and comes in reaction after the central bank doubled the limit for individual users to $160 billion. The program allows banks, money-market funds and other financial firms to park cash overnight while earning five basis points (yes that is correct) and has become increasingly popular with Wall Street firms flush with cash and seeking short-term havens to stash it. The debt ceiling situation is also fueling renewed talks for the Trillion Dollar Platinum Coin idea that gained sway a decade ago during another debt standoff. Recall that the proposal derives from an arcane piece of law in the U.S. Code regarding minting and issuing coins and medals, which says that coins may be of any notional denomination. That means the U.S. Treasury could mint a platinum coin of $1 trillion U.S. dollar notional value, then deposit that coin into its account at the Federal Reserve. With the account at the Fed now credited up to $1 trillion, the Treasury would then buy back U.S. Treasury bonds to prevent the debt ceiling from being breached (yes this looks familiar as it’s the equivalent of quantitative easing). In any regard, Treasury attention is all the more popular than ever now with the financial logjam at Congress and the big swings we’re seeing daily. Yesterday the long benchmark lost three points to bring yields back below 1.95% and curve flatten to its narrowest since last December.

Chart of the day

Markets

Quote of the day

Keep your face always toward the sunshine - and shadows will fall behind you.
Walt Whitman



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