Read on the Trading Floor - 28 Sept 2023
Today’s focus…
Theme 1: US government shutdown looks inevitable and drags the chances of a Nov hike lower...
McCarthy has told the GOP that he would not allow a vote on the Senate stopgap bill and what's being brought forward by the House has no chance of passing the Democratically controlled Senate .... So where do we go from here? Who is going to back down?
In terms of the market, the focus is on the data for errrr a data dependent Fed. If the shutdown mirrors the previous two, the US economic data could be delayed by at least 2 weeks. As pointed out by my colleague in this morning's TMH, "it looks unlikely we get the October labour and inflation reports until late next month at best. Data dependency by the Fed will take a hit and surely, the fact that the data will be late and the economic consequences of the shutdown, a November hike will be taken off the table. Let’s see"
Thanks to @blindsquirrelmacro for pointing us towards Russell Clark and his Substack
. His piece from earlier this month on the PRO-LABOUR SHIFT CONTINUES is excellent (spoiler alert short bonds was the reco on Sept 19th).... with yesterday's sequel also worth flagging (What to short?)Some further reading of note that caught the attention of our users on the evolving debt ceiling narrative...
Fortune: How a government shutdown will affect your student loans
MacroHive: Dom’s Quick Take: Government Shutdown Could Last About 10 Days
Theme 2: Expanding strikes and the EV impact on jobs
The Ford chief back in Nov 2022 indicated that it takes up to 40% fewer jobs (source FT) to manufacture EVs than it does traditional cars. This is crucial in understanding the UAW's directive, are they fighting to retain jobs, or higher paid jobs for the few that remain? With Trump and Biden paying visits this week to Michigan it is clear the industrial Midwest is an important outpost on the way to the White House.
The evolution of the EV production line is being built to require less skilled labour and crucially in non-unionized operations in southern states (but elon says they have more fun). An opinion piece from Rep Senate candidate Mike Rogers (Biden’s EV plan will kill Michigan job) focuses on this point as well as national security risks within the EV supply chain
China's control of the critical minerals needed to manufacture EVs is a flaw in Biden's policy.
Moving to hybrids supports UAW jobs in long term and has a net bigger carbon impact than EVs given hybrids need less of the critical minerals China controls in their manufacture.
He wants to reduce carbon emissions in a far more efficient way while also protecting American job.
Furthermore, GZero (Biden’s EV agenda runs up against his China agenda too) points out that POTUS is stuck in a three-way squabble between "Union Joe, Green Joe, and China Hawk Joe... People can’t buy EVs unless they are cheaper, but they can’t get cheaper (for now) without Chinese technology, but they can’t get Chinese technology without tripping up the policy of NOT using Chinese technology."
Some further reading of note from Harkster.com, UAW look to expand their strikes and there has been very little, if any communication between the Big 3 and UAW.
ZeroHedge: UAW Boss Set To Announce 'Expanded Strikes' At Detroit Automakers If No Progress Made By Friday
WSJ: This Ford vs. GM Feud Could Shape the Future of EVs in America
ZeroHedge: UAWS Real Enemy Is Forced EV Conversion
Detroit News: Donald Trump: UAW negotiations 'don't mean as much as you think'
Theme 3: Oil...
Two of our favourite reads here @HarksterHQ are focused on oil, USD, yields, correlations flipping and what it means for rates and FX.
- author Brent Donnelly’s latest am/FX ..... One Less Vulnerability
Steno Research: SOMETHING FOR YOUR ESPRESSO: FROM A USD-WRECKINGBALL TO AN OIL-WRECKINGBALL
Furthermore, the WSJ warn that this time fracking is not the supply answer... "The U.S. remains an oil and gas superpower. Rystad Energy forecasts that American crude production is on track to hit a record 13 million barrels a day in September. But the industry’s recovery from the pandemic was relatively slow—it last recorded 13 million barrels a day in November 2019—and it appears that it is no longer willing to grow rapidly to meet rising demand. " Oil Is Near $100. Shale Isn’t Coming to the Rescue.
Theme 4: on the eve of the Ryder Cup...
.. which is easily one of the best weeks in sports .... will the Marco Simone be heavily setup to benefit the home team (rough is thick according to Tommy Boy), will the outrageously strong USofA team come together to win it in Europe for the first time in 3 decades or will they miss the heavyweights that left behind the Ryder cup for the riches of the LIV tour ...
The Guardian: Thirty years of hurt: when USA last won the Ryder Cup in Europe
GolfDigest: Ryder Cup 2023: Ryder Cup homefield advantage is so real it might be unfair
Finally, let's hope Victor's hole in 1 on a par 4 is a good omen for the weekend ahead (@GolfChannel)
Have a great day and keep smiling
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@ashendenfinance …. The soft landing narrative is fading, together with the market bullishness
The New York Times: Crypto's Wild D.C. Ride: From FTX at the Fed to a Scramble for Access
- ... Postmortem on long equity positions, and why I'm now bearish everything. It's not often you see someone so open about their trade ideas, review their recommendations as well as outline the lessons they've learnt from their drawdown's h/t Geo Chen
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