Just in time to put a Spirit Halloween in the abandoned White House... a government shutdown is right around the corner (potentially), and options are few. We’ll know tonight if McCarthy gets the votes in the House for a package of bills to fund parts of the gov. The Senate is working on its own bipartisan stopgap, but it sure would have been nice if they had been a bit more proactive and collaborative earlier, right? Babies need nutrition, and travelers don’t want their air traffic controllers working without pay.
There is growing short exposure on tech, an early 2023 darling that is now being questioned as the Fed may continue to keep rates higher-er for longer-er. Positioning, per BBG, in the NASDAQ 100 is now net-short at $8.1bn. Long positions are unwound, per Citi. But, Dimon…coming out with an estimate that US rates could hit 7% is not very helpful. October is the month for being spooky, but that level would scare the pants off traders and cause a lot of damage to consumers and businesses.
Bloomberg reported that the TLT is down 48% from its 2020 high, trading at its lowest level since 2011. The long-dated Treasury ETF is losing money and now sits at $39bn in size.
The MSCI ACWI is on track to match its longest losing streak in the past decade. The ACWI includes developed markets (US, Eurozone, Japan) as well as EM.
Currency desks are prepping to halve the time it takes to settle equity transactions to one day. Right now we, for instance, may trade in a local position but then have to wait for several days for a custodian to complete the FX trade. Most FX markets currently settle on T+2, so workers will be facing longer hours to make that happen within a day.
The EU’s anti-subsidy probe has Tesla in its crosshairs. China may have subsidized Tesla (and domestic EV manufacturers), giving them an upper hand in sales. Tesla sold 47% of its made-in-China vehicles in the EU, per Schmidt Auto Research. They’ll be getting to the bottom of Musk’s ability to have a wholly owned domestic op, tax breaks, cheap loans, and other perks that enabled Tesla to make China key to its ops.
I’m not writing about China. BBG wrote about the constant surveillance of teens by parents as being a source of their mental health challenges.
A Fed study showed that the bottom 80% of earners exhausted their cash savings and now have less cash than before the pandemic. I saw the news yesterday about this and didn’t write about it, but it still hits me today. Consumption is coming from the rich. Most everyone else has to pause. That has ramifications for your stocks.
Evergrande is not so grande, missing payment on a $547mm bond after cancelling creditor meetings. Xi is trying to end the property crisis, so this can’t be helping. Bloomberg is out with the story. China markets were down again overnight.
The US Dollar has remained a safe haven. Its spot index is up 1.8% this month. Given GDP growth divergences, heightened risk as traders brought up rate bets, and a more risk-off mood of late, this is not a surprise.