Latest / Felix Nikolas Prehn's Podcast / ️FED Flips as Gulf War 3 Just Started + Stock Market News 12 January 2024

Transcript

️FED Flips as Gulf War 3 Just Started + Stock Market News 12 January 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: Felix here and welcome to this morning live stream.
• 0:02
  Speaker 1: War in the Middle East, a fed that's backtracking on rate cuts, oil at $80.
• 0:09
  Speaker 1: This is some of the glorious things happening this morning.
• 0:11
  Speaker 1: But the good news is the JP Morgan bank has made a lot of money.
• 0:15
  Speaker 1: There is always a silver lining that is actually a silver lining for the market.
• 0:20
  Speaker 1: It's the one thing that's rescuing futures here this morning, which we're looking very, very red and sour, but well, the big banks are pulling us out of the misery.
• 0:32
  Speaker 1: I'm going to walk you through the key data sets here, the key things to understand, both the geopolitics, how it ties in with the financial market, but of course also we'll talk about the individual stocks.
• 0:44
  Speaker 1: And after I run through the key stuff here, you're super welcome to ask me a gazillion questions.
• 0:50
  Speaker 1: Of course, after you've smashed the the, you know watch is severely now.
• 0:54
  Speaker 1: First thing is first I'm going to share my screen with you here.
• 0:58
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• 1:09
  Speaker 1: Most people just think it's too complicated.
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• 1:35
  Speaker 1: It's free.
• 1:37
  Speaker 1: Now we've got Biden backing, far reaching Yemen strikes.
• 1:41
  Speaker 1: We've seen the U?
• 1:42
  Speaker 1: S and the UK striking targets in Western Yemen and you might think, well, they'll just blow those rebels, the Hooties, out of the desert and they'll be over.
• 1:55
  Speaker 1: The Saudis have been doing that for five years.
• 1:58
  Speaker 1: They're not actually going to achieve anything other than making themselves feel better and selling a few more missiles.
• 2:04
  Speaker 1: I'm not saying the US should do nothing, but I'm just saying this isn't going to be a short-term solution.
• 2:10
  Speaker 1: It's not like like that.
• 2:11
  Speaker 1: It's much, much more complicated.
• 2:13
  Speaker 1: The Hooties are Iran funded and equipped.
• 2:16
  Speaker 1: They've got tons of drones and missiles that cost $20,000 a piece and the US shoots each one of them down with a million dollar missile, which tells you something about margins and corruption in the US industrial military complex.
• 2:34
  Speaker 1: Someone's making some serious money here.
• 2:37
  Speaker 1: And the Hooties respond by saying this we're going to attack more ships.
• 2:41
  Speaker 1: Good luck trying to stop us.
• 2:43
  Speaker 1: So that's what we are this morning Now to understand this story and I don't want to be a sort of catastrophist on this, because it isn't a catastrophe but it's important this little straight here is what connects the Red Sea where there is the canal that goes up to Europe, and the Gulf countries, who are in that direction.
• 3:06
  Speaker 1: So oil comes from here and it moves up in this direction.
• 3:09
  Speaker 1: The Hooties control this little strip of Yemen around the port of Hudada, and that's where they launch their attacks from.
• 3:20
  Speaker 1: If you look at the live map and I've literally got an open life we can have a look at it in a second as well these are the vessels going through that.
• 3:29
  Speaker 1: It's a great website called vesselfindercom that I use for one of my businesses where we ship containers around the world of stuff.
• 3:36
  Speaker 1: So the orange ones are oil tankers and you're starting to see the number of these fizzle out.
• 3:44
  Speaker 1: It still looks like quite a lot, but not that many, and some of them notably either turning around or almost stopping, which is pretty unusual.
• 3:53
  Speaker 1: So a lot of the big container ship liners and oil tanker owners, like Merck and so on, are basically saying we're not going to go past this because it's just craziness, and that's also the recommendation.
• 4:08
  Speaker 1: It's probably uninsurable at this point to go through here.
• 4:12
  Speaker 1: So you're going to see that bit fizzle out and that is one of the most important Well transport routes in the world, quite frankly, and that's had an impact.
• 4:23
  Speaker 1: If you look at the cost of shipping a 40-foot container, it's literally today, just today, shipping a container from Shanghai to Italy, genoa, which is a big port in Europe, has literally gone up $800, $825 today in the space of one day.
• 4:45
  Speaker 1: Now rates are now over $5,000, so that's a 25% increase in one day.
• 4:51
  Speaker 1: You think this isn't inflationary.
• 4:52
  Speaker 1: This is inflationary and this is why the story really matters to me.
• 4:56
  Speaker 1: I mean, there is always a miserable war somewhere.
• 4:58
  Speaker 1: I couldn't care less, but this is gonna impact the cost of shipping goods and even last week we were already up 15% on container shipping rates because of the Huti attack, but just today and we're at 25% on top.
• 5:17
  Speaker 1: So we were at $3,000, and now we're at $5,000 today and that could continue to grow up very, very sharply because the alternative route is much, much longer and much, much more expensive.
• 5:30
  Speaker 1: New York route was up to $75.
• 5:33
  Speaker 1: Today Brent was at $80.
• 5:36
  Speaker 1: At one point it's trading slightly below that, now at $79 or thereabouts, but that's still maybe two or 3% up in a day, which definitely matters.
• 5:48
  Speaker 1: So that's something to consider, which again, of course, is inflationary.
• 5:53
  Speaker 1: And then you've got the lovelies at the Fest, like Fett's master, who's a voting president, saying it's probably too early for a rate cut.
• 6:01
  Speaker 1: So kind of backpedaling on the rate cut story.
• 6:05
  Speaker 1: And that's on the basis of the inflation data we got out, not actually on the basis of this.
• 6:11
  Speaker 1: Now, inflation data isn't going to magically explode in a month, but if this conflict continues and gets larger, because the Iranians keep feeding the Houthis with missiles and the Americans keep pounding the Houthis because they feel like it, then you properly shut down this trade route.
• 6:34
  Speaker 1: And if you do that, freight costs are going to go up another 50% and oil will probably climb another $10, $20.
• 6:41
  Speaker 1: So that's an inflation scenario which wouldn't mean inflation goes further up and we're probably not going to see rate cuts till maybe June or thereabouts.
• 6:54
  Speaker 1: Now a few other things that are happening and, possibly because the Fett is a little smarter than you think, the Fett has actually pumped money into the market for the first time in a while about $5 billion last week, and that's stimulus, folks, and that's one of the reasons the market is looking so good.
• 7:14
  Speaker 1: It's the first time they've done that.
• 7:16
  Speaker 1: Let me get a thicker pen.
• 7:17
  Speaker 1: You see this little bar here, first time they've done that since March banking crisis, march.
• 7:23
  Speaker 1: Now that's partly well.
• 7:27
  Speaker 1: Largely the money goes to banks because we got this reverse repo selling and the low setup which is meant to be a temporary bank bailout.
• 7:37
  Speaker 1: It's not going to be temporary, it's going to be permanent and that now has $600 million left, which isn't a great deal.
• 7:47
  Speaker 1: So we are going to go to zero on that likely, which would mean, well, the Fett would have to provide liquidity, which would be quantitative easing, so we might get what we want in the form of quantitative easing, as in money printing, what we might not get the rate cut.
• 8:06
  Speaker 1: That's a possibility as of today's data.
• 8:09
  Speaker 1: Now the other thing of course we're getting, thanks to Papa Biden, they are spending more than anybody has ever spent in peacetime or in non-crisis peacetime.
• 8:20
  Speaker 1: So, excluding COVID, no US government has ever spent this much money outside a war or a crisis.
• 8:28
  Speaker 1: Is there a crisis?
• 8:31
  Speaker 1: You're seeing a massive uptick in the quality of your government services.
• 8:35
  Speaker 1: You think your tax dollars are being well spent.
• 8:39
  Speaker 1: Well, the good news is you're paying less tax, because, well, normally, look at this normally, when tax receipts decline, it's because we've just had a recession.
• 8:53
  Speaker 1: And, of course, in 2023 or 2022, there wasn't a recession because the government said there isn't one.
• 9:00
  Speaker 1: There are a couple of wise old men in Washington who get to decide whether there is a recession, and we've slipped them 20 bucks to make sure that there isn't one.
• 9:09
  Speaker 1: I think that's pretty much how it works.
• 9:11
  Speaker 1: So we've seen a massive seven point decrease in government revenue over the last 12 months, and that's typically a sign we've just been in a recession and maybe, therefore, we will get the magical soft landing.
• 9:27
  Speaker 1: But that again means the deficit is going to get bigger.
• 9:30
  Speaker 1: Why do you care?
• 9:31
  Speaker 1: Well, look at where we are.
• 9:33
  Speaker 1: The 2024 deficit is on track to be bigger than the COVID deficit About $590 billion down so far on the 11th of January.
• 9:54
  Speaker 1: Isn't that marvelous?
• 9:55
  Speaker 1: I'm glad the great people are in charge, because otherwise the wrong people would be in charge.
• 10:02
  Speaker 1: Now, why is the market not just collapsing this morning and futures are actually now flat?
• 10:09
  Speaker 1: Bizarrely, still is at 79.55, up almost 3 percentage points.
• 10:14
  Speaker 1: If you look at the pre-market heat map Nvidia, amazon, apple, tesla, unh slightly down but pretty much flat.
• 10:24
  Speaker 1: Tesla has some issues, so we get into that in a second.
• 10:26
  Speaker 1: Around that German plan to shut down and price cuts in China, so that impacts them.
• 10:32
  Speaker 1: But wouldn't you expect, in a day like this, higher risk of inflation, lower likelihood of rate cuts, not a war, when you think the market would tank?
• 10:42
  Speaker 1: Well, this is where the backers come in.
• 10:46
  Speaker 1: Walt Street is saving you.
• 10:48
  Speaker 1: Those little midtown vest wearers are doing their thing for the country and they are pulling us out of the misery.
• 10:57
  Speaker 1: Jpmorgan beating expectations on profits marvelously Revenue beats.
• 11:03
  Speaker 1: Bank of America beats on profits and slightly less revenue.
• 11:08
  Speaker 1: Actually.
• 11:09
  Speaker 1: Great black rock beating massively on earnings and on revenue.
• 11:15
  Speaker 1: City group huge beat on profits, miss on revenue.
• 11:20
  Speaker 1: But we all we care about really is profits.
• 11:22
  Speaker 1: So even Delta Airlines beating on earnings, which is slightly staggering and surprising, really.
• 11:29
  Speaker 1: So the bankers have pulled it out of the bag.
• 11:32
  Speaker 1: And is that because they have cured cancer or solved world hunger or done something useful?
• 11:39
  Speaker 1: No, they have notched up another me record.
• 11:45
  Speaker 1: What is me Me is a lovely reference to Monty Python, but no, that's not what it stands for.
• 11:52
  Speaker 1: It's net interest income.
• 11:54
  Speaker 1: Net interest income is a measure by how much do they rip off their depositors, their customers, you and me who have money in.
• 12:04
  Speaker 1: I actually have money in a JPMorgan Chase account, and why?
• 12:08
  Speaker 1: Because I think it's the bank least likely to fail, and they've brought in in the last quarter $24 billion thanks to the Fed raising interest rates and thanks to the stupidity of their customers who don't move their money to, say, a SOFI account where they might actually get a decent interest rate.
• 12:30
  Speaker 1: So $24 billion in a quarter for doing nothing is not glorious.
• 12:36
  Speaker 1: That's how you make money.
• 12:38
  Speaker 1: You start a bank.
• 12:39
  Speaker 1: Lovely, isn't it?
• 12:41
  Speaker 1: And yes, blackrock is doing well too, so it's always good, isn't it?
• 12:45
  Speaker 1: So I'm sure the bonuses are going to be all right.
• 12:49
  Speaker 1: Dimon, just JPMorgan CEO, also just made us feel a little bit more warm and fuzzy inside.
• 12:54
  Speaker 1: He said the need for increased government spending on the green economy, the military and restructuring of global supply chains may lead inflation to be stickier and rates to be higher than the market expects, and therefore he would collect more need for longer net interest income.
• 13:13
  Speaker 1: So it's in the vast majority of businesses that could be affected and are really discovering that only these president and his independently developed companies need more funds for.
• 13:18
  Speaker 1: It's good news for Wall Street.
• 13:20
  Speaker 1: If you're a Wall Street banker, it's always a good day it doesn't really matter.
• 13:24
  Speaker 1: They have also which is a slightly concerning side story written off $2 billion in, basically, credit card losses and put aside another $600 million because they think some of the lower end income consumer people might not be able to pay for the third Ferrari.
• 13:44
  Speaker 1: That's sort of the thinking of Wall Street, you see, and that's quite significant because generally, jp Morgan has a relatively good customer profile in terms of income, but there are obviously a lot of people not able to pay their credit card balances, which is well, it's the no recession soft landing miracle, clearly.
• 14:06
  Speaker 1: What can you do about it?
• 14:06
  Speaker 1: Well, you can laugh and giggle about it or tear your hair out or scream manipulation, or you can just join them and then, when you can't beat them, or you can do is join them.
• 14:15
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• 14:29
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• 14:37
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• 14:48
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• 14:54
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• 14:54
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• 15:01
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• 15:11
  Speaker 1: And that's what the 1% do.
• 15:13
  Speaker 1: They have their money work for them.