For those of you who would like to take advantage of our Luck O' the Irish SALE but prefer not to make payments online, you are welcome to send us a check or money order in the amount of $114.12 for a 3-year AD-FREE Premium Service Bundle or $190.20 for a 5-year Bundle. Make checks or money orders payable in US funds to "Investor Village" and send to: Investor Village, P.O. Box 2958, Marrero, LA 70073.
As many of you know, we operate on the honor system around here. So, in closing out our Luck O' the Irish SALE, we wanted to advise those of you who plan to pay by check or money order that you can send a PM to Admin informing us of your intention. We will then upgrade your account for 7 days, allowing you to enjoy our ad-free premium service now and giving you a reasonable amount of time to get your payment in.
This is a semi-private group. You are free to browse messages, but you must be a member of this group to post messages. Join This Group
Group: Canadian Blue-chip Industrial Forum
/ Message Board / Read Message
Investors are anxiously awaiting news from central banks, as policy makers in North America and Europe deal with soaring inflation, slowing economic growth, and volatile markets. Uncertainty is elevated heading into the Fed decision this morning as fears grip markets on concern its aggressive stance to fight inflation will throw the U.S. into a recession, triggering a stunning selloff in bonds in recent days.
The Treasury market remains on edge but is rallying after Monday’s rout sent yields to multi-year highs. The policy decision will be released later today with traders now almost fully pricing in a 75 bps hike, betting that the Fed will push the benchmark borrowing costs to almost 4% by February, from today’s 1% level. The two-year and 10-year curve inverted briefly yesterday, signaling concerns that aggressive monetary tightening may trigger a recession. In Canada, anticipation is mounting quickly for a super-sized interest rate hike from the BoC next month with the market now pricing in an 80% chance of a 75 bp hike at the bank’s July 13 meeting, which would bring the policy interest rate to 2.25%.
The ECB’s Governing Council will be holding an emergency meeting today “to discuss current market conditions” as Italy’s 10-year rose above 4% for the first time since 2014 this week. After 10 years of not hiking rates, the ECB may not be raising borrowing costs to keep bond yields of the region’s most vulnerable members in check at the same time. Last week, the ECB announced that it intends to raise rates by a quarter-point in July, followed by a larger hike two months later as it fights against soaring prices.
Companies with good access to liquidity are taking advantage of the panic gripping global financial markets to lower their debt leverage ratios by buying back securities at large discounts. The cheaper prices present corporate treasurers with the opportunity to clinch capital gains by lowering their financial liabilities at a steep discount to their book value. The rise in buybacks comes as dollar-denominated investment-grade corporate bonds trade at the biggest discount over their face value since 2009, at around 90.9 cents on the dollar, and junk-rated debt changes hands at the lowest price since the start of the pandemic, at about 87.6 cents.
The whiskey war is over. Since 1971, Canada and Denmark have been "fighting" the "Whiskey Wars" to settle competing claims over Hans Island. Successive expeditions from Ottawa and Copenhagen have braved icy conditions to plant bottles of alcohol on the tiny 1.2 sq km rock on an uninhabited Arctic Island. In true Canadian fashion, we have agreed to divide the outpost roughly in half. The prank war began after Canada and Denmark convened to settle boundary disputes in the Nares Strait, a channel of water separating Canada and Greenland, which is an autonomous territory of Denmark.
BP announced it was taking a 40.5% stake in an Australian energy project being billed as “one of the largest renewables and green hydrogen hubs in the world.” BP said it would operate the $36 billion "Asian Renewable Energy Hub", an array of solar and wind facilities sprawled over 6,500 square kilometres of Australia's sparsely populated west coast. It will produce 1.6 million tonnes of green hydrogen each year, with plans to export much of this to major Asia-Pacific markets such as Japan and South Korea.
The General Court (part of Court of Justice for the EU) completely annulled a fine of nearly €1 billion that the European Commission levied against chipmaker Qualcomm four years ago. The antitrust fine was for payments that Qualcomm made to Apple between February 2011 and September 2016, to ensure the inclusion of its 4G mobile-broadband chipsets in iPhones and iPads. The fine amounted to 4.9% of Qualcomm’s 2017 revenues.
Coinbase Global Inc. will cut about 1,100 jobs, or 18% of its workforce, the latest company preparing to ride out a downturn in crypto. The cryptocurrency market has been roiled by extreme volatility as investors dumped risky assets on fears that higher inflation readings would force the Fed to turn more aggressive in raising interest rates and tip the economy into a recession.
Commodities
Oil retreated ahead of a Federal Reserve meeting that’s expected to see further monetary tightening to combat rising U.S. inflation. On the flip side, the International Energy Agency (IEA) cautioned there won’t be enough supply to meet demand next year. In their monthly report, the IEA cited a resurgent Chinese economy will bolster consumption, while tighter sanctions on Russia will curtail oil output and that OPEC+ would need to deplete its spare production capacity to historically low levels to satisfy demand.
U.S. natural gas is recovering from a price plunge yesterday after Freeport LNG said its facility that had a fire last week likely won’t be back up and running soon. The market will now be temporarily oversupplied as 2 bcf/d or a little over 2% of demand for U.S. natural gas has been abruptly eliminated. Despite the –16% drop yesterday, U.S. natural gas prices are still up 93% since the start of the year. Demand has rebounded as worldwide economies emerge from the pandemic, while supply has remained constrained.
Fixed income and economics
“To be, or not to be. That is the question.” --- Hamlet
While the tone of this section isn’t even close to the grim parable from the above quote, we can at least say that a similarly fearful uncertainty is unfolding on the market stage such that Shakespeare himself will want to stay for the fifth act. The “question” on everyone’s mind today is whether the Federal Reserve will stick to their previous forward communication of hiking by 50 bps, or will they cave into the recent pressure from hedge fund managers/Wall St./former Treasury Secretaries/Jim Cramer and fire away with a 75 bps rate increase. There are pros and cons to each. Tightening by 50 bps will reaffirm Chair Powell’s repeated stance of not wanting to surprise markets and his strong preference of telegraphing policy moves well in advance. Would a singular CPI report that beat expectations last Friday change his tone? It’s unlikely, especially considering inflation has accelerated beyond survey estimates many times over the past six months. The more plausible and less damning approach would be to go 50 bps today and table an extremely hawkish lean to tee up a 75 bps hike on July 27 while publicly stating the FOMC will “do what is necessary” should the need arise. Doing this would reaffirm the Fed’s credibility (however little is left) and remind everyone that officials remain steadfast in their future policy trajectory that won’t be undone by the talking heads in the cheap seats. Further to this, one has to believe that the Fed prefers to be cautious and avoid making a policy error. The last thing they want to do is raise 75 bps, realize it was overdone, then have to cut rates down the road. Instead, they are going to let the market do the work for them in their battle against inflation. Falling asset valuations combined with a recently declining M2 will inherently lower spending and reign in surging prices. Toss in higher yields from long Treasuries making housing affordability more challenging, and you have a hit to the wealth effect for consumers. All of this should slow inflation naturally. Don't forget that it also usually takes 6-9 months for a rate hike/cut to work its way into the economy. Hence, “market tightening” via the signaling effect and communication of aggressive future moves is actually a swifter and more powerful tool in invoking their desired monetary policy.
Chart of the day
Markets
Quote of the day
If you're going through hell, keep going. Winston Churchill
Contributors: A. Innis, A. Nguyen, D.Mak, J. Price, P. Kwon