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Msg  70459 of 70993  at  10/7/2021 11:23:52 AM  by

carswell


The Launch Pad

Richardson Wealth - Connected Wealth
Daily market commentary
The Launch Pad
October 7, 2021
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Today

Bolstered by progress on the debt-ceiling standoff, stock futures jumped this morning, continuing yesterday’s midday comeback. Much like the last time the US approached their debt ceiling, a temporary stay until December has reportedly been reached. This will be positive for risk assets this morning like the S&P 500, which has now spent 12 scary days below its 50-day moving average. Despite having been an especially volatile month driven by uncertainty about U.S. fiscal and monetary policy and supply chain constraints, we are starting to see economic data suggesting the economy has started to climb out of the delta-driven summer slump.

The Theranos saga continues as the former CEO Elizabeth Holmes fights 12 counts of wire fraud and conspiracy to commit wire fraud. Federal prosecutors allege Holmes and her top executive engaged in a multimillion-dollar scheme to defraud investors and patients. Theranos was an American privately held corporation which was touted as a breakthrough health technology company, with claims of having devised blood tests that required only very small amounts of blood and could be performed very rapidly using small, automated devices the company had developed. However, these claims were later proven to be false. If you don’t want to keep up with all of this, we are sure this will be made into a movie very soon.

Attention all sports betters! Even though the fans are back and the crowds are loud, the home-field advantage still isn't a factor early this NFL season. Road teams have won 33 of the 64 games over the first four weeks, extending a trend that began in 2019 and continued through the pandemic-impacted 2020 season when games were played with few, if any, fans. The .484 winning percentage for home teams is the sixth worst since the merger through four weeks of game action. There was some expectation that would change this season when road teams would once again have to deal with loud crowds that forced silent counts and made running offense more difficult, but that hasn't contributed to more home wins

Be prepared for higher grocery bills. The jump in global food prices risks leading to even more expensive grocery bills, and the energy crisis is threatening to make things even worse. Recent harvest setbacks, strong demand and supply chain disruptions have sent a United Nations index of food costs up by a third over the past year. Soaring energy bills are now adding to the problem, escalating costs of producing fertilizers and transporting goods around the world, and making the run-up more reminiscent of the price spikes seen during food crises in 2008 and 2011.

Florida is currently home to the reigning Super Bowl Champions and the reigning Stanley cup Champions. It will also soon be home to Cathie Woods’ ARK Invest, viewed by some as a champion in innovation investments. The money manager will permanently shutter its corporate headquarters in New York in October and head down South to sunny St. Petersburg. The pandemic has forced corporations to rethink their real estate footprint, including ARK Invest as the company’s hybrid work model will allow for a “substantial” number of the approximately three dozen staff members to relocate, while the remaining staff will be allowed to work remotely. Despite the lure of the sun, sand and Disney, it was Florida’s favourable tax rates that made the move that much more compelling for the company.


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Company news

Times are changing and now so are credit card rewards. In the US, the American Express Platinum card which has long been associated with its tony travel and dining perks is changing up its benefits as it tries to remain relevant for customers during a time when travel remains restricted by Covid-19 - the perks now include rewards from discount retailer Walmart Inc., and even adding credits for SoulCycle Inc.’s at-home fitness program. This comes with a whopping annual fee of $695, up from $550.

IronHeart” is looking to take Apple’s CarPlay interface one step further. Despite facing many setbacks with Apple car, CarPlay which lets motorists use iPhones to control infotainment features has now been adopted by most major car companies. IronHeart will now give the iPhone-based system access to a range of controls, sensors and settings like climate-control system, speedometer, radio and seats. Interesting name choice though, Ironheart also looks to be a Marvel superhero and Disney is looking to launch a series based on her.

Colliers International announced an agreement to acquire a controlling interest in Antirion, one of the largest real estate investment firms in Italy which has more than 3.8 billion euros of assets under management. The firm will be rebranded as Colliers Global Investors shortly after closing, which is expected in the first quarter of 2022. Exact terms have yet to be disclosed.

Pfizer and BioNTech have officially submitted their request to the U.S. FDA for Emergency Use Authorization of their Covid-19 vaccine in “children 5 to 12”.


Commodities

Oil prices fell sharply this morning, extending losses from the previous session, as the U.S. said it was considering selling oil from its strategic reserves and as Russia said it was ready to stabilize the natural gas market. At the time of writing, NYM WTI Crude futures are down -1.47% to US$76.29/bbl and ICE Brent Crude futures are down -1.30% to US$80.03/bbl.

Gold steadied this morning, buoyed by a slight dip in the dollar, but held a tight range as investors steered clear of big bets before U.S. jobs data that could give the Fed more fuel to wind down economic support measures. Gold Spot is up +0.04% to US$1,763.24/oz this morning.



Fixed income and economics

With the U.S. Senate appearing poised to be nearing an increase in the debt ceiling until December, a collective sigh of relief is looking to cascade upon one portion of the market that has been somewhat overlooked with all the drama in Washington. The front end of the TBill curve has been under pressure over the past week as the political standoff risks triggering a financial logjam if lawmakers don't raise the limit on government borrowing before October 18. After this day, the U.S. Treasury will technically run out of money for paying various obligations. It is for that reason that both daily and weekly TBill yields maturing shortly thereafter have risen sharply to reflect the risk that maturities are not repaid on time. October 19 TBills for example saw their rates increase from 0.04% to 0.12% over the course of a week to reflect default fears. Compare this to the 0.08% one-year rate and we’ve got an inverted bill curve that hasn’t been seen since 2019 (the last time the debt ceiling was nearly breached). Anyway, with interest payments of $4 billion due on October 15 and $14 billion on November 1, we’re even seeing U.S. short-dated CDS spreads rising yesterday to +25.0 basis points over benchmarks --- the highest since 2017 as a missed payment would classify as a default, potentially leading to a credit downgrade.

Freddie Mac will be posting their latest rate update on 30 year fixed rate mortgages today, and it is widely expected that the cost to fund a home will hit fresh six-month high. The commitment rate survey from the government agency closed at 3.01% on September 30 and a twelve basis point increase from the week prior. The nominal rate of the long Treasury bond has since risen by another six basis points over this time which should translate into a higher residential home mortgage rate. This will counter the overall decline in overall mortgage activity as per the Mortgage Bankers Association (MBA), whom reported yesterday that both new and refinancing transactions were down -6.9% from the previous week. The latter group is off -10% specifically and is now down -16% from a year earlier, suggesting that higher rates are reducing borrowers' incentive to refinance (not to mention that many Americans already took advantage of the pandemic crisis to seek out better borrowing terms).


Chart of the day

Markets

Quote of the day

The greatest use of a life is to spend it on something that will outlast it.
William James

Contributors: A. Innis, A. Nguyen, P. Kwon, D.Mak, J. Price

 


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