Remember just a few months ago? Yesterday’s inflation reading via CPI data wiped out global bond rally hopes, which started when investors jumped on the idea that the Fed had pivoted to favor rate cuts. A BBG index of global debt has fallen -3.5% this year, wiping out all of its gains since Dec. 12, the day before the Fed’s meeting.
US mortgage rates rose last week to a 2-mo high, reversing the trend that investors hoped would drive a housing recovery. The contract rate on a 30-yr fixed mortgage was +7 bps to 6.87%.
US regional banks loaded up on commercial real estate loans based on buildings that are now worth a fraction of their initial price. So, deals are starting to pick up — and unsurprisingly at deep discounts. The regulators and lawyers are gearing up as well. In Manhattan, brokers are marketing debt backed by a Blackstone-owned office building at a 50% discount, per BBG. Remember the prime LA building that sold at a 45% discount to its purchase price back in Dec?
Have you met the younger generations? They’re not coming back to the office lured by warm cinnamon rolls. Here in SF, we’ve seen the US’ highest rate of available office space in 4Q23 at 37%. Globally, we’re a stand-out too. Americans are forging their own path these days, and they value WFH.
Japanese officials are ready to prop up the yen. They don’t want to see it drop past 150 per USD. The next level they’re watching is 152.
That’s what you’re in for. Longbow is bringing together a group of talented investors and traders to provide a daily view into their top ideas. This week, one of the investors discussed energy as an intermediate term idea, with a specific put on a name in the short-term. Standard Chartered seems to agree with the future trajectory, saying that Brent should be priced >$90 because current levels don’t “fully reflect the rapid tightening of the market or the recent escalation of geopolitical risk.”
ASR came out with a piece suggesting downside protection for Indian equity bulls, because any rally in Chinese equities will pull liquidity from other sources…and India is the #2 EM weight behind China.
Now, folks are saying that GLP-1’s (Wegovy, Zepbound) alleviate depression and anxiety. So, if you’ve been waiting for that dosage to become available, the supply squeeze will get worse, especially if they start getting insurance companies to pay for this stuff for more treatments. But even without long term studies it kind of makes sense. If you are obese, you are probably upset about it. If you have depression, you may have a higher likelihood of becoming obese. So, they’re probably related for many folks.
That’s the working title of most EZ countries’ revised defense plans. If Trump wins and eggs Putin on to invade NATO countries not investing their fair share, they’ll be coughing up the dough for sure—and taking it from other areas. On Friday, there’s the Munich Security Conference. Given our presence in and support for Germany, you can guess this will be a key topic. When spurred, as per below, they find a way to get that cash.
BBG has a story out about the growth in plants by the Chinese in Mexico to supply the US. Chinese auto-parts makers are rapidly creating the ecosystem to supply Tesla’s next factory. This happened a lot due to Trump-era tariffs, but there is a new surge going on. Musk gave out $153mm in local gov “incentives” which probably went a long way. Also, EVs assembled in Mexico can still qualify for the US tax credit of up to $7,500 so as long as no battery minerals or components were sourced from China.
