Month: August 2023

Two months ago when both revolving credit (i.e., credit card debt) and interest charged on credit cards hit a record high, we said that this trajectory was unsustainable and it was only a matter of time before the debt-funded US consumer hit a brick wall. One month later, the first brick wall was hit, when in May US consumer credit grew by a paltry $7.24BN, down more than 50% from the downward revised $20.3BN in April; and while revolving credit posted a healthy increase of $8.5 billion, the shocker was in the non-revolving segment, also known as student and auto loans, and which unexpectedly dropped by $1.3 billion, the first negative print since April 2020

Amusingly, in our commentary last month we also said that “with non-revolving credit now shrinking, the final straw will be the reversal in (record) credit card debt. With credit card interest rates also at a record 22.16%, we won’t have long to wait.”

We were right: we had to wait just one month, because fast forwarding to today’s release of the latest Fed consumer credit report at 3pm ET, moments ago we had another shocker, this time on the other side of the credit spectrum, because while non-revolving credit jumped by a whopping $18.5 billion, up from last month’s drop (which was revised to a tiny positive print this time)…

… it was the revolving credit that was the jawdropper this month, because after several months of solid increases, including a near-record $14.8 billion in April, in June credit card actually dropped by $0.6 billion – the first negative print since April 2021 when the US consumer was still in shock from the post-covid reality and was aggressively saving money, money which has now been long spent.

Needless to say, a drop in revolving credit is a stunner because outside of a crisis, this is usually indicative of an end-of-cycle recession, when US consumers – traditionally responsible for 70% of US GDP with their debt-fueled purchases – go into hibernation and start to repay their bloated credit card bills.

Adding across these two categories, the total June consumer credit print was +$17.85BN which as noted above, was entirely thanks to the $18.5BN increase in non-revolving (student and auto loans) credit.

Drilling deeper into the non-revolving credit print reveals that not all is well here either, because while in Q2 auto loans increased by a healthy, if hardly, blockbuster $17.6 billion (to be expected when rates on 60-month auto loans are at all time high), student loans actually shrank by $9.1 billion, the first decline since Q2 2022, and at a time when most student borrowers are still in forebearance.

And once repayment of student loans resumes by mandate in two months, watch out below.

Meanwhile, with average credit card interest rates rising above 22% to a new record high…

… this month’s drop in credit card debt was just the beginning…

As Bloomberg Markets live commentator Jake Lloyd-Smith writes this morning, oil’s had “a curiously muted reaction” to the latest twist in the war in Ukraine, with Brent getting only a small lift before trading flat and then dipping into the red.

For those who missed the latest news, on Saturday a Russian oil tanker was hit by a Ukrainian sea drone in the Kerch Strait. In addition, on Friday, Ukraine attacked a Russian naval ship with a sea drone in the Black Sea port of Novorossiysk.

Kiev recently said that it had designated six Black Sea ports – a vital conduit for its crude – as being in “war risk” areas, indicating that there could be further attacks on Russian territory.

As Academy Securities reports, “Ukraine’s goal in attacking the tanker was to increase insurance costs for Russia’s partners that are buying oil and shipping it out of those ports, which raises the true cost of buying “discounted” Russian oil and hurts Russia financially.“

The number of attacks in the Black Sea by both Ukraine and Russia have increased since Moscow terminated the grain deal last month that had allowed Ukraine to continue to export grain to alleviate the global food crisis.

With Ukraine’s land-based counteroffensive making no progress in the latest humiliation to NATO forces which are waging war against Russia by Ukraine proxy, Kiev is now looking to expand the conflict into the Black Sea and even into Moscow where Ukrainian drones attacked buildings last week; indeed, as Ukraine’s defense ministry said in a Saturday post that “Two can play that game” in response to Russian attacks on Ukraine grain infrastructure.

And, as we first noted late Friday…

First Novorossiysk now this: Ukraine targeting Russian oil exports. https://t.co/lZz1udrdLi

— zerohedge (@zerohedge) August 4, 2023

… for the first time, the attacks put at risk Russia’s commodity exports via the Black Sea, a route that accounts for most of the grain and 15% to 20% of the oil that Russia sells daily on global markets. Significantly higher insurance and shipping costs are likely to follow for Moscow, but there are risks to European and global markets, too.

Taken together, all this represents an important escalation. The spike in military activity comes as crude has recorded six consecutive weekly gains.

That’s why Lloyd-Smith cautions that despite today’s muted reaction, “oil prices are set for gains this week as more details of the shift become clear, and as traders factor the latest set of risks into outlooks that already looked positive. “

The recent oil rally was spurred by Saudi Arabia and Moscow extending voluntary supply cuts; expectations of oil deficits as large as 2mmb/d barrels in the coming months…

… as US inventories last week sunk by a weekly record; and reports that global demand is at a record high. Expect further validation of the bullish story later this week, when both the IEA and OPEC weigh in with revisions to their market outlooks, while in the US, the Energy Information Administration will present its Short-Term Energy Outlook as well.

Bottom line: there’s plenty of headline risk here, on top of any developments on the battlefield, and traders are rapidly preparing to take advantage of the coming price spike: according to the latest CFTC data, money managers posted further increases in bullish bets for most oil products last week, the highest since April while WTI outright longs were the highest since July last year……

… oil products Net Managed Money surged by 30mb this week, stood at 66 percentile

… and ICE gasoil net-longs hit the biggest since May 2022.

Meanwhile, Nymex gasoline net-bullish positions hit the highest since February last year.

Authored by Steve Watson via Summit News,

In a segment that looked like something out of Monty Python, PBS NewsHour brought on a therapist to help people suffering from ‘climate anxiety’ on Sunday.

Anchor John Yang announced the “climate psychology therapist,” noting “This summer, millions of Americans are experiencing firsthand the effects of climate change. Triple-digit temperatures for days on end, smoke from record-setting wildfires fouling the air, warming oceans, bleaching coral reefs…”

“Psychologists say that can be a positive thing, spurring people to action. But for some people, it becomes an overwhelming sense of despair or anxiety,” Yang continued, adding “Psychologists call it climate anxiety. This week, we asked people about their emotional responses to climate change.”

We were then treated to seven troubled individuals who have reached the end of their mental tethers from watching too much climate fear porn, before one Leslie Davenport appeared to urge “it’s really important to acknowledge that if you’re feeling that on any level of intensity, it really means you’re paying attention, you care, you’re empathetic to what’s happening to our world.”

Davenport then encouraged the mentally crippled armageddon obsessed climate tweakers to “Talk about it, talk about it to other people who are like-minded, receptive, ‘I feel that way too,’ so that it’s not as isolating.”

She continued, “there are a lot of what are called climate cafes, or climate circles, that can be found by an easy online search, where people just get together often online, remotely, and just say what they’re feeling what they’re experiencing, what people have found helpful.”

Davenport added that there is even a “climate-aware therapist directory” that the poor babies can turn to.

Watch:

Is it any wonder hordes of normies are suffering from mental meltdown when every news channel they switch to is telling them the world is literally boiling and on fire?

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Niger’s coup leaders have closed the country’s airspace as an alliance of neighboring West-backed countries prepares a possible military intervention to restore the democratically elected government under President Mohamed Bazoum.

The Economic Community of West African States (ECOWAS) had at an emergency meeting days ago declared that Bazoum must be reinstated by Sunday, or that the junta could face military action.

On the same day, the military government announced the airspace closure until further notice due to threat of military invasion from neighboring countries.

“Faced with the threat of intervention which is becoming clearer from neighboring countries, Niger’s airspace is closed from this day on Sunday… until further notice,” the junta announced. The statement further warned of a “vigorous and instantaneous response” if any outside power violates Niger’s airspace.

Niger’s military leadership also claimed ECOWAS has initiated “pre-deployment in preparation for the intervention” in two Central African countries, but they weren’t named. “Any state involved will be considered co-belligerent,” the statement said. For the time being, it appears Niger’s junta has called ECOWAS’ bluff.

ECOWAS is a huge blog of 15 member states, consisting of Benin, Burkina Faso, Cabo Verde, Cote d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo. ECOWAS is expected to hold summit on the Niger situation this Thursday in Abuja, where a final decision on military intervention could be made.

CNN is reporting Monday that new military reinforcements have been seen pouring into Niger’s capital:

Niger’s armed forces have been bringing in reinforcements to the capital to prepare for a potential military intervention, a military source told CNN, just hours after the military junta running the country refused to abide by an influential regional bloc’s deadline to cede power.

A convoy of about 40 pick-up trucks arrived at nightfall on Sunday evening, bringing troops from other parts of the country to both reassure a nervous public and prepare for potential battle.

The Associated Press had reported of its meeting at the end of last week, “in neighboring Nigeria’s capital, Abuja, the region’s defense chiefs finalized a plan to use force against the Niger junta — needing approval by their political leaders — if Mohamed Bazoum is not reinstated as Niger’s president,” The Associated Press detailed of the emergency summit.

The US military trains militias in Africa to overthrow Governments that don’t want to kneel to US Empire and hand over their natural resources. Watch @mattgaetz destroy the US General in charge of illegally spreading “democracy” in Africa. Great job Matt. pic.twitter.com/8OZjK2zc8e

— Kim Dotcom (@KimDotcom) March 25, 2023

But importantly, Mali and Burkina Faso, both with military governments, have sided with Niger’s junta. They too are warning against any intervention by enemy states.

Niger’s coup leaders have meanwhile also called out France, alleging that Bazoum’s officials had issued legal permission for French military intervention to restore constitutional government. Any potential intervention by the West African nations would likely happen along Nigeria’s some 1,000-mile border with Niger.

Authored by Charles Kennedy via OilPrice.com,

• A new study shows that the United States has just 22 EV charging ports per 1,000 miles of road, far fewer than its 104 gas pumps.

• The new study highlights the disparity between states, with Massachusetts having the best density of EV charging stations.

• Analysts project that more than a million new public EV charging stations will be required in the U.S. by 2030.

There are about 104 gas pumps per 1,000 road miles on average in the United States compared to just 22 EV charging ports for the same road distance, a new study by smart fuel card management platform Coast showed on Monday.  

As EV sales rise and the Biden Administration is pushing for transport electrification to reduce emissions from one of the most-polluting sectors in the U.S., the number of EV charging points is not enough now and the density of charging stations in some states is much lower than in others, according to the study. The team at Coast used data from the U.S. Department of Energy and the U.S. Department of Transportation to explore the state of EV charging infrastructure in the U.S.

Massachusetts, Rhode Island, California, Hawaii, Maryland, Colorado, Oregon, Utah, and Washington are the U.S. states with more EV charging opportunities than gas stations, the study found. 

Massachusetts is top of the list.

In this state, there are 31.4 EV charging stations on average per 100 square miles and only 18.4 gas stations per 100 square miles. Rhode Island and California follow closely behind, as both states provide residents with extensive charging networks to reinforce their commitments to cleaner transportation alternatives.

“While EV adoption continues to surge, ensuring convenient and accessible charging options is crucial for further growth and widespread acceptance of electric vehicles. The transition to electric transportation requires a concerted effort to build a robust charging infrastructure,” the authors of the study wrote.

Early this year, the Biden Administration announced actions to significantly expand the U.S. EV charger network to support its EV sales goals and back the Made-in-America manufacturing of components for charging stations.  The set of actions is expected to help the Administration’s EV sales goals by building a national network of 500,000 EV chargers along America’s highways and in communities and have EVs make up at least 50% of new car sales by 2030.  

Analysts project that more than a million new public EV charging stations will be required in the U.S. by 2030 to accommodate the demand for electric vehicles.    

We warned Friday, ahead of the payrolls print, that the data could be the catalyst that finally shakes the VIX from its mid-summer slumber.

And so it should not be a huge surprised that the VIX complex is increasingly acting the way we’ve anticipated – what Nomura’s Charlie McElligott calls “nervous and squeezy”.

VVIX is evidencing the challenged Dealer positioning dynamic into August expiration, being extremely short VIX Calls (and as McElligott notes, Dealers pretty short PUTS too for that matter – thus the Vol of Vol expansion!)…

particularly into the well-socialized scar-tissue of August’s past and ugly seasonality…

…but of course with the risk that these Calls decay hard into VIXpery which could dictate a Vol selloff / Equities rally, in the potential absence of more Equities Spot selloff follow-through this week.

However, a VIX squeeze remains a significant potential issue because of Systematic Vol Control positioning, as highlighted here for weeks – VC now 95.8%ile Equities exposure on 3Y lookback…

As such, the Nomura MD warns that Vol Control is a lumpy seller if the daily SPX range were to widen-out…

With UX1 ~17.3, this is implying a ~ 1.1% daily range in SPX; and IF we were to see a -1%/+1% move today, McElligott estimates a modest ~-$4.2B of de-allocation selling. However, a -2%/+2% move today would lead to ~$35B of Spooz selling…

…while a whole week of -1%/+1% would be closer to ~-$30B of selling, with a lot of convexity on any wider range…

The next major data points come in on the 10th, with CPI & continuing claims. SPX upside is likely now limited to 4,550 until the 10th, as implied volatility holds a relative premium due to these data points.

Authored by Tsvetana Paraskova via OilPrice.com,

Poland’s pipeline operator PERN said on Sunday it had halted a section of the Druzhba pipeline carrying oil from Russia to Europe after detecting a small leak that is being fixed, with oil flows set to be restored by Tuesday.

The damaged section, where there is no indication of the leak being caused by a third party, is under repairs now, the company said in a statement carried by Reuters.

“The expected time for pumping to resume is Tuesday morning,” PERN said.

Security of supply to Germany is “fully guaranteed,” a spokesperson for the German federal Economy Ministry told Reuters.

Apart from the section under repair, other parts of the infrastructure operated by PERN are operating as usual, including the Pomeranian section, which is used to pump crude oil arriving in tankers to Poland and then further to Germany, the company said.

A view shows a leak detected in Druzhba oil pipeline as reported by Polish pipeline operator PERN, in Chodecz, Poland August 5, 2023, in this picture obtained from social media. Anna Trzeciakowska via X/via REUTERS

Parts of the Druzhba pipeline have come under attack since the Russian invasion of Ukraine.

Earlier this year, a pumping station on the Druzhba oil pipeline was shelled in a western Russian region bordering Ukraine and Belarus, but the oil flows continued.

The Druzhba pipeline is a key artery of oil supply from Russia to Europe, with two branches – a northern one via Belarus to Belarus, Poland, Germany, Latvia, and Lithuania, and a southern one passing through Ukraine and sending oil to the Czech Republic, Slovakia, Hungary, and Croatia.

Flows through the Druzhba pipeline are exempted from the EU embargo on imports of Russian crude oil by sea that came into effect on December 5. The EU has exempted pipeline oil flows to landlocked EU member states from the ban.

Nevertheless, Germany and Poland have said they would halt imports of Russian crude via the Druzhba pipeline as of January 1. Germany did it on the first day of this year, following through on a previous pledge to stop buying Russian pipeline crude despite the fact that the EU embargo exempts pipeline flows from Russia to Europe.

The judge overseeing former President Trump’s classified documents case, Florida District Judge Aileen Cannon, rebuked federal prosecutors on Monday while striking down two of their filings.

DOJ special counsel Jack Smith has been directed by the court to unseal two filings and to provide a comprehensive legal rationale for a Washington, D.C. grand jury’s involvement in the investigation. Specifically, Cannon, a Trump appointee, has ordered Smith to explain “the legal propriety” of using a DC Grand Jury in a Florida matter.

“The Special Counsel states in conclusory terms that the supplement should be sealed from public view ‘to comport with grand jury secrecy,’ but the motion for leave and the supplement plainly fail to satisfy the burden of establishing a sufficient legal or factual basis to warrant sealing the motion and supplement,” the order reads.

“Among other topics as raised in the Motion, the response shall address the legal propriety of using an out-of-district grand jury proceeding to continue to investigate and/or to seek post-indictment hearings on matters pertinent to the instant indicted matter in this district,” the order adds.

Canon was responding to the special counsel’s motion for a “Garcia” hearing, where Smith’s team addressed a potential conflict of interest posed by Stanley Woodward representing defendant Walt Nauta and individuals who could be called to testify in the classified documents case, the Daily Caller reports.

Trump and Nauta are scheduled to be arraigned Aug. 10 for the classified documents case. Smith issued a superseding indictment July 27 with additional charges for Trump and new charges for Mar-a-Lago employee Carlos De Oliveira who allegedly moved boxes around Trump’s Florida estate.

Smith indicted Trump Tuesday for allegedly contesting the 2020 presidential election results and for his alleged role in the Jan. 6, 2021 Capitol riot. The former president pleaded not guilty at an arraignment in Washington, D.C. Thursday and accused Smith of “persecution” for his latest charges. -Daily Caller

Separately, a grand jury in Washington DC indicted Trump last week on four counts over alleged efforts to overturn the 2020 election.

Read Monday’s order below:

Cannon Order by James Lynch