DHUnplugged #638: Those Vigilantes!

Financials reporting - mixed results. All much worse than a year ago.The HOPE trade is looking for a kindlier and gentler Fed.

China has an interesting update on their population.

Yield Curve inversion is real - pay attention.

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Warm Up

- Market in Rally Mode

- Climate Change at Davos, ESG defended (should be defunded)

- China releases population studies

- Mega Million > $1.35 Billion (ONE WINNER!)

- Biden classified docs - wow,  unforced error there.

Market Update

- Quick Check - January 2023 - SP500 +4.2%, TLT +7.22%, QQQ +7%, EEM 9%, BTC +28%, FXI +13.5%, GLD +5%

- USD Basket 2023 Down 1%, 3 Months - 9%

- Bank earnings - mixed, watching for margins and outlook for remainder

- Bond yields pricing in easier Fed - 10Y @ 3.5%

- EU hints on slowing rate hikes - maybe only 0.25% at next meeting.

Deflation Talk ?

Commodity Prices

Housing Deflation?

Housing Prices (CS20)

AH Tweet: 

- If you were wondering - not just a flash in the pan occurrence. Yield curve clearly and definitively inverted. Will discuss tomorrow night on DHUnplugged Podcast.

Inversion

Speaking of the USD

- Morgan Stanley cut its 2023 year-end forecast for the dollar index to 98, and expects the greenback's weakness to be more pronounced against the euro this year as worries about the severity of an economic downturn start to ease.

- They previously saw the index , which weighs the U.S. currency against a basket of six major rivals, ending 2023 at 104.

- Global growth is showing signs of buoyancy, macro and inflation uncertainty are waning and the USD is rapidly losing its carry advantage

USD Weakness? Change in Central Bank Policy? Bond Vigilantes attack

- Yields on Japan's benchmark 10-year government bonds breached the central bank's new ceiling on Friday in the market's most direct challenge yet to decades of uber-easy monetary policy.

- A wall of selling catapulted 10-year Japanese government bond yields 4 basis points higher to 0.54%, the highest since mid-2015 and above a recently widened band of -0.5% to +0.5% set by the BOJ in a shock decision just a few weeks ago.

- No more negative yields - anywhere in the world

----- This is where it gets interesting - The stress was evident across the yield curve and defied the BOJ's announcement on Friday of a fresh round of emergency buying worth around 1.4 trillion yen ($10.84 billion), when it already holds 80% to 90% of some bond lines.

--- BOJ owns more than 50% of all bonds issued from Japan (Eating your own arm because you are hungry)

Europe Off The Hook for Deep Recession?

- Europe experienced its second-warmest year on record in 2022, European Union scientists said on Tuesday, as climate change unleashed record-breaking weather extremes that slashed crop yields, dried up rivers and led to thousands of deaths.

- This was big concern due to Nat Gas Pricing and Oil (Russia related)

- - Now said that Europe may not enter recession....

---- In other words, they have no idea as early in the Winter and anything can happen - but betting warm conditions continue?

Back to Davos

- Climate activists protested in Davos on Sunday against the role of big oil firms at this week's World Economic Forum (WEF), saying they were hijacking the climate debate. (In other words, they are disagreeing with Climate activists and they don't like that)

- And here who is saying this: "We are demanding concrete and real climate action," said Nicolas Siegrist, the 26-year old organiser of the protest who also heads the Young Socialists party in Switzerland.

- With ESG crapola under scrutiny - there is an opening here