Force Majeure

Charles+Street+Meeting+House
‘CHARLES STREET MEETING HOUSE’, 10 X 10, OIL ON CANVAS -NICHOLAS ANTHONY MANCINI

Screen Shot 2018-09-02 at 10.14.33 PM

I want to break out of the rigidity that my previous notes presented and focus instead on one dynamic and then work backwards to arrive at a market / world view.

The one dynamic I will be focusing on is price. So what are prices telling us happened today?

The Us Dollar Index (DXY) fell back from its early highs of 95.737 but still finished the day with a moderate gain.

The Euro (EUR) currency had another modest decline off the August 15th to EOM rally which neared $1.17, this predominantly due to strength in the US Dollar, as opposed to any headline risk affecting the Euro directly. The $1.15-$1.14 level looks to be the next support area and if broken we may retest the YTD lows of $1.13. 

The US Treasury (TYA) market saw significant safe haven outflows and closed with sizable losses.

All eyes ahead for the US NFP Jobs Report.

Japanese (NKY) equities were down 0.1% overnight.

Indonesia equity markets (JCI) continued there sell off, down another -1.2% overnight (12% YTD). 

Greece’s stock market (ASE) down another -0.7% overnight and down -5.3% MoM (-19% YTD). 

Brazil’s 10yr Yield  was higher overnight to +12.34% taking it to +121bps in the last month as Brazilian Stagflation takes effect.

Oil (CL1) the most bullish move in the macro space. 

Gold (XAU) continues its svengali relationship with the dollar, down another -0.4% overnight (-10% YTD). 

Copper (HG1)continues it’s search for the bottom, down -1.9% overnight (-22% YTD). I began the year short copper as my instrument to play China’s slowing economy. Whether I was too stupid or stuck to my guns with the driver of this trade, I did not exit the short when Copper rallied “haahrd” in June reaching $330 USD/lb.

In April, Chinese Industrial production hit 7.2, marking a high for the value added by  Chinese industrial companies over the previous six reports. In June, faced with hard comps, industrial production in China sequentially began rolling over.

While the correlation between Chinese Industrial Production and Copper (HG1) remains strongly correlated. We can see a significant uptick in the pairs positive correlation after the June due to worries about demand in top consumer China that were reinforced by loans data and a firmer dollar.

To wit: A firmer U.S. Dollar currency makes dollar-denominated commodities more expensive for non-U.S. firms, which could potentially dampen demand.

Meanwhile, labor negotiations at the giant Escondida mine in Chile provided some support to declining copper prices.

Global miner BHP said it had responded to the latest contract proposal from unionized workers at its Escondida mine, the world’s largest, triggering a new round of talks that could last a month or more.

The union’s proposal, filed with the company in early June, included a salary increase of 5 percent and a one-time bonus of $34,000, equivalent to 4 percent of dividends distributed to shareholders. – CNBC 

 

Following a mixed set of European data points, the ISM manufacturing index posted its highest reading since May of 2004.

However, the latest construction spending result was weaker than expectations.


Checking in with the domestic earning releases of the day.

Screen Shot 2018-09-03 at 5.35.17 AM

 

 

Related image

RH forecast adjusted earnings per share for the third quarter; the guidance midpoint beat the average analyst estimate.
Sees 3Q adjusted EPS $1.15 to $1.33, estimate $1.21 (range $1.14 to $1.29) (Bloomberg data)
Sees FY adjusted EPS $7.35 to $7.75, estimate $6.72 (range $6.53 to $6.92) (BD)
2Q adjusted EPS $2.49
2Q net revenue $640.8 million
2Q comparable sales +5%
Raises FY18 Earnings Guidance
Sees year adjusted EPS $7.35 to $7.75, saw $6.34 to $6.83
Lowers year rev guidance by about 2%
Sees 3q adj. eps $1.15 to $1.33, saw $1.04 to $1.23
Sees 4Q adj eps $2.33 to $2.54, saw $2.16 to $2.39, EST. $2.41

NOTE:
Shares rise 6.4% since earnings release to $161.30 on 203,968 shares traded
7 buys, 13 holds, 2 sells

-Bloomberg 

Implied volatility for Restoration Hardware (RH). 

 

-R.W.N II

Mail AttachmentMail Attachment-1

Banyan Capital Management, LLC (“BCM”) is a publisher, not a registered investment advisor, and nothing in BCM’s newsletter is intended, and it should not be construed, to be investment advice. BCM’s newsletter is for informational use only. Any mention in BCM’s newsletter of a particular security, index, derivative, or other instrument is neither a recommendation by BCM to buy, sell, or hold that security, index, derivative, or other instrument, nor does it constitute an opinion of BCM (or of any of its officers, employees, agents or representatives) as to the suitability of that security, index, derivative or other instrument for any particular purpose. BCM is not in the business of giving investment advice or advice regarding the suitability for any purpose of any security, index, derivative, other instrument or trading strategy and nothing in BCM’s newsletter should be so used or relied upon. BCM is not acting as your financial advisor nor in a fiduciary capacity, with regard to any securities, index, derivative or other instrument referred to in BCM’s newsletter. Also, no representation is made concerning the tax implications in any applicable jurisdiction regarding any securities, index, derivative or other instrument and BCM is not advising you in respect of the tax implications. All opinions and estimates in the newsletters are given as of the date of their publication on the BCM’s website and are subject to change and BCM does not assume any obligation to update the newsletters or to reference any such changes. BCM hereby expressly disclaims any and all representations and warranties that: (a) the content of its newsletters is correct, accurate, complete, reliable or a guaranty of future performance; (b) any of its newsletters will be available at any particular time or place, or in any particular medium; and (c) that any omission or error in any of its newsletters will be corrected. BCM shall not be liable for any errors or omissions made in its newsletters or for any inaccuracies in its assumptions. BCM specifically disclaims liability for any losses or damages (incidental, consequential or otherwise) that may arise from the newsletters and that are either used or relied upon by anyone for any reason, including without limitation, the use of the newsletters in the preparation of any financial books and records. Although from time to time BCM’s newsletter may link to or promote others’ websites or services, BCM is not responsible for and does not control those websites or services. BCM’s newsletter is published and distributed in accordance with applicable United States and foreign copyright and other laws. Without the prior written consent of BCM, no person or entity, directly or indirectly, may copy, reproduce, recompile, decompile, disassemble, reverse engineer, distribute, publish, display, perform, modify, upload to create derivative works from, transmit, or in any way exploit all or any part of BCM’s website, its newsletter, or any other material belonging to BCM.

Without the prior written consent of BCM, no person or entity, directly or indirectly, may offer all or any part of BCM’s website, its newsletter, or any other material belonging to BCM for sale, nor may any person or entity, directly or indirectly, distribute all or any part of BCM’s website, its newsletter, or any other material belonging to BCM over or by means of any medium.
Without the prior written consent of BCM, no person or entity, directly or indirectly, may make all or any part of BCM’s website, its newsletter, or any other material belonging to BCM, available as part of or in connection with another website, whether by hyperlink, framing on the Internet or otherwise. At any given time BCM’s principals may or may not have a financial interest in any or all of the securities and instruments discussed herein. At any given time BCM’s principals may or may not have a financial interest in any or all of the securities and instruments discussed herein.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.