Monday Markets – Waiting for the Fed

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Happy Halloween!

The Dollar is bouncing back and that’s going to put a bit of pressure on the markets in what is likely to be a slow trading day.  Over 111 and it would be a miracle if we don’t push lower.  

Why is the Dollar strong?  Because we KNOW the Fed is adding 0.75 to our rates on Wednesday and we don’t know that other Central Banks, who are behind the curve on raising rates – will be following our Fed as Europe and Asia are both staring down the barrel of a Recession (as are we, most likely).   Not all Central Banks think destroying demand is the best way to fight inflation – some favor increasing supply but our Fed has no faith in US ingenuity, apparently.  

Eurozone Inflation hit 10.7% in October, the result of their weaker currency exacerbating the underlying conditions.  To make matters worse, Putin seems to be reneging on his grain deal with Ukraine – where Russia was supposed to allow exports through the Black Sea.  That sent Wheat Futures (/ZW) flying higher this weekend.  

More than half of the 19 countries in the eurozone recorded double-digit inflation rates in the year through October, including Germany (11.6 percent), the Netherlands (16.8 percent), Italy (12.8 percent) and Slovakia (14.5 percent), with the Baltic countries at the highest end of the spectrum with rates over 21 percent.

Natural Gas (/NG) blasted back over the $6 line after a crazy sell-off that was based on a warmer-than-expected fall but, as predicted by our chief Natural Gas Analyst, Ned Stark: “Winter is coming” and you never know what those crazy Russians will do next so /NG is a nice thing to play, whenever it’s below $6 (on the way back up, of course).  

Aside from the Fed on Wednesday we have Chicago PMI this morning, ISM and Construction Spending tomorrow, Productivity, Factory Orders and ISM Services on Thursday and Friday, it’s the Big Kahuna – Non-Farm Payrolls.  

Calendar - Oct 31 2022

And, of course, there are plenty of earnings:  

Image

We’re just under 11,500 on the Nasdaq 100 and that’s a nice, bullish line if we cross it.  A lot of Big Tech got oversold last week and we’ll see if the buyers are willing to scoop some of them off the ground.  Chinese stocks took an additional hit earlier this morning on more lockdowns – even in Macau again – hurting the casino stocks. 

We cleared all our goals last week and this week, with the Fed, we’ll be happy just not to drop back down.

We’ll see how things go.

 

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Hi Phil,
Did I miss the 3/360 installment of how to become a millionaire with $700/month?
Happy Halloween, B

Hi Phil,
I’m trying to find out how to become a millionaire with $700/month, but the chat system says I already said that 🙁
Happy Halloween, B

Sorry for the duplicate question.

ATVI a trader still betting the deal with MSFT goes through
10,000 June $60 puts sold and 10,000 $85 calls bought for .60 debit \
I think the buyout is for $92

Thanks Phil. You’re the best and worth the price of admission.  😄 

Phil,
Have a follow-on question to wiseradvisor’s comment about the price of CIM puts on “How to…” Is it more important to get a fill at a lower price or wait for a higher price which may not come around again?

Phil / HBI – the debt load is challenging….

Hanesbrands cut to ‘Sell’ at Wells Fargo on debt, macro concerns
07:34 AM By: Kevin P. Curran, SA News Editor

Hanesbrands Inc.

Equity analyst Ike Boruchow said that potentially weak profits in upcoming earnings, a deteriorating macro backdrop, and concerns on the company’s debt are primary concerns driving the downgrade from “Equal-Weight” to “Underweight”. Foreign exchange issues are also anticipated to adversely impact earnings. 

“These challenges are likely to push shares lower over the medium term, as numbers likely continue to come down,” he told clients. “While we have commended the new team at HBI for their strategies to turn the business around, the potential problems we see ahead are largely out of their control—and we expect the market to react cynically until we receive more clarity on fundamentals.”

He assigned the stock a $5 price target, suggesting significant downside from Friday’s closing price of $7.20. Shares slid 4.17% prior to Monday’s market open.

Phil what is your take on miners? Specifically Copper. It usually trades on economic sentiment. It seems like a complicated process that takes a long time to get a mines up and running. Copper demand will increase if electric cars will be outselling ICE cars in a decade. Those cars will continue to be expensive if there are not enough metals to around.

Yes and no… As batteries get more dense (fewer connections and shorter distance to run those connections) and move to higher voltages, the need for copper is reduced.

Ohms law, V=I*R (voltage = current * resistance). Another version, P=V*I (Power = voltage * current). If you double voltage, your current cuts in half for constant power. Another version is P=I^2*R (power = current squared * resistance). If you cut the current in half, you can cut the size of the conductors in half which results in less power loss. If you shrink the conductors, you also increase the resistance so that eats up some of the gains from the higher voltage.

I don’t expect savings on a per vehicle basis to out run the increased vehicle count, but it isn’t going to be as dramatic as you’d expect.

Source: I’m an electrical engineer

Wow , Thanks JPH1121. Shows the power of collective minds and abilities. I will defer on the calculations:) I do think I attempted to use some of those formulas when I helped install Solar panels on a camper truck. Plus people think Teslas are cool, but few people want a mine near them ( except for those in WV and WY). I do know that EV’s use more copper than comparable ICE cars now. Copper is also needed for solar and wind turbines plus heat pumps.

What about grid upgrade to feed all these electric battery cars? Density/number of charging points and their integration-connection to grid.

Distributed generation (solar/wind) and batteries radically alter the load characteristics. Your conductors need to be sized for your peak usage, not your average usage. As batteries hit the grid, they act to smooth the load which causes your peak/trough consumption to more closely align with your average. Your peaks go down (I^2*R losses are critical here) and your troughs go up.

Similarly, all of these charging and transmission devices are moving to higher and higher voltages reducing the copper requirements per unit. Same deal though–improved material usage is going to counter some of the increase, but probably not all of it.

To be clear, I’m speculating on the economy-wide usage figures, but the amount/unit figures I strongly believe will trend down over time, ableit not monotonically.

FCX

Thanks for all the material ! Changes are coming and we will have to pivot when necessary.