January 19, 2024 • 23 mins
In this episode, Abdul navigates the complex currents of global affairs. He unravels the strategic maritime maeuvering of many big shipping companies and discusses the economic implications of these developments. He then shifts focus to the US economy, dissecting the Consumer Price Index inflation report and its implications for the bond markets. Additionally, he delves into the groundbreaking approval by the US Securities and Exchange Commission for the first spot Bitcoin ETF's.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:02):
Good afternoon, ladies and gentsmen.Welcome back to the Investor DIT podcast,
where we help you work smarter andharder by providing market updates and insights.
Today, I want to start discussionon global trade. There have been some
developments that have impacted global trade.There have been some ships being attacked in
Yemen, and of course people won'tget into the politics of it, but
(00:22):
more so the economic implications. Next, we'll talk a little bit about inflation
in the US. We'll have somecommentary on the recently released CPI inflation report,
and then end off with some cryptonews. So, the crypto world
are celebrating the approval of I thinkeleven bigcoin spot ETF, so we'll talk
(00:43):
a bit about what that means forbigcoin crypto in general, and you know
what ETFs are. So let's goon our first story. The Mediterranean Shipping
Company, which is the world's largestshipping company, has announced the diversion of
its ships away from the Red Seatdue to an increased threat of attacks.
Now, this decision falls similar movesby other major shipping companies, and they're
(01:07):
all navigating high intensions stemming from recentattacks by different military groups in Yemen.
Now, the Red Seat is avital root for oil and fuel shipments,
and it has now become a hotspotfor geopolitical tensions. Of course, this
comes from what's going on in Palestine, and so there's a lot of drones
(01:27):
being employed, rockets, and thesemilitary groups have intense fine attacks on foreign
owned vessels, prompting significant concerns withinthe shipping industry. Now, the canal
is called the Bab al Man Depthstraight right, and it's often referred to
as the Gate of Tears, andit's finding itself thrust into the global spotlight
(01:49):
as shipping giants are altering their roots, which signifies its rising significance in and
the complex challenge it poses. Now, this narrow channel sits between Yemen,
Jibouti and area and it serves asa critical route for ships traveling to the
Swiss Canal. Now, approximately seventeenthousand ships, about ten percent of global
(02:13):
trade passes through this strategic waterway annually. And now this decision to divert roots
implies longer journeys, increased costs,and potentially disruptions to the global supply chain.
Now let's talk a little bit aboutyou know, geopolitical vulnerabilities. I'm
I'm Somali, right, So anation that's acutely aware of the regional dynamics,
(02:38):
I observe that the Bible Manustrate isnot only a vital maritime passage but
also geopolitical hotspot. Now, Yemen, located to the north of Sawaya,
has been grappling with, you know, internal conflicts with different rebel groups targeting
ships in the Red Sea, andthe escalation of hostilities in this region really
amplifies concerns about the vulnerability of themaritime roots, prompting shipping companies to rethink
(03:00):
their strategies. Now, the BibleManimstrate serves as a crucial conduct for the
economies of the countries along the shores, including Smario, and any disruptions in
shipping activities through this waterway can havecascading effects on regional trade, potentially affecting
livelihoods and economics. Ability and thelonger routes taken by vessels avoiding the strait
(03:23):
may lead to increased transit costs,affecting the competitiveness of goods from the region
in the global market. So let'stalk a little about the global challenges of
global trade now, global trade heavilyrelies on efficient and secure maritime roots.
Any challenges posed to a key passagelike the Bibble Manustrate revertebrate globally. Now,
(03:46):
this decision by shipping giants to divertroutes indicates a recognition of strategic vulnerabilities
in the region. Longer journeys notonly translated into increased fuel costs, but
also pose logistical challenges, potentially disruptingthe intricate web of global supply chains.
Now, I'm a want to speculate, but looking ahead, it is plausible
(04:10):
to anticipate that the Babble Manustrate willcontinue to be a focal point of concern.
Of course, because this, thisconflict between is real, impass there's
no real you know, there's noreal end in sight. So I'm pretty
sure or I'm well, I hopenot. But it looks like, you
(04:31):
know, the conflict in in Yemenand and in the Red Sea specifically will
continue. And this geopolitical tension iscoupled with strategic importance of this waterway,
may prompt hide an international attention anddiplomatic efforts to ensure security. Now,
I foresee that the nation's bordering theright Sea and the Gulf of Aiden,
(04:56):
including Somario will play a crucial role. Well, they'll have have to in
shaping the geopolitical dynamics of the region. And just talking about Somalia's stake in
this, you know, being fromSomalia, I be recognized to interconnect the
nature of regional jew politics and itsimpact on the Horn of Africa and Somalia's
coastline along the Indian Ocean positions itself. You know, it's a it's a
(05:18):
key player in the maritime affairs ofthe region. The battle Mandum Straates challenges
underscore the importance of regional cooperation insafeguarding shared maritime interest. Now Somalia is
evolving political landscape may find itself payinga pivotal role in fostering stability and security
in these critical waters. So ifyou want to know, take a little
(05:41):
history lessons we learned from the pastto really gain a comprehensive understanding of what's
going on today. You know,one reason cannot overlook historical instances where trade
routes underwent similar challenges in parallel tothis is maybe is this smiss connect this
Swiss crisis of nineteen fifty six wheregeopolitical tangents led to the closure of the
(06:06):
whole canal, and the repercussions wereprofound. There's a serve and shipping costs
along trans times and then reshuffling ofglobal trade patterns, and now the current
situation echoes the importance of maritime routesand the vulnerability of global trade to disruptions
in key passages. So I've beentalking about costs going up, costs going
(06:29):
up, but let's break it down, right, So shipping experts are rediscrutinizing
the fallout, diverting roots from thebabble mandu straight emphasized epsides of multifaceted cost
considerations. Right, So the addedcruing, fuel, insurance expenses from all
these financial burdens for the companies evolvedand this entails meticulous analysis of the financial
(06:55):
impact of each aspect crewing costs influencedby the extended voyage durations present at presented
that direct economic burden, potentially leadingto adjustments in crucises or compensation structures.
Fuel expenses now are a significant componentin maritime operations as you can imagine,
and there are ployees to escalate dueto prolonged journeys and Now, the interger
(07:18):
relationship between fuel costs, level allprices and their impact on the overall shipping
industry requires a nonce examination. Furthermore, insurance premiums driven by highened geo political
risks could skyrocking, challenging the financialresilience of shipping companies. Now, let's
talk about economic implications beyond the shippingindustry. Right, so, shipping companies
(07:43):
obviously take a hit. What doesit mean for people on the outside.
Now, the suspension of operations bysome of the world's top shipping companies in
the bibleministry set in motion a dominanteffect across the broader economy that anticipated economic
implications encompass multiple dimes mentions ranging fromthe stock market dynamics to supply chain intricacies.
(08:05):
Investors are likely to witness fluctuations instock levels, mirroring the uncertainty surrounding
the strategic waterway. Cost Increases bornby shipping companies are often transferred to consumers.
Right, They're not going to haveyou put the burden on themselves.
What's going to happen is our pricesare going to go up, right,
(08:26):
And once they do this, theyform a crucial link in the economic chain.
As added expenses rippled through the supplychain, the end consumer newer me
may find ourselves facing higher prices forgoods. This anticipated economic repercussion assnuates the
interconnectness of global trade and the susceptibilityof consumers to disruptions in maritime roots.
(08:52):
So another prediction by me regarding thefuture directory of economic fallout, well,
well, i've read online right,some analysts make you know they have been
closely monitoring the duration of root diversionsand the gym political developments and diplomatic efforts
aimed at ensuring the security by maritimepassages. But I do feel that extended
(09:18):
disruptions could amplify economic consequences, potentiallyprompting nations and international organizations to intervene in
safeguarding the vital trade which has alreadystarted. You know, if you've been
following the news, there has beensome retaliation from them. So again then
(09:41):
one get too into that. Butit's happening and it's sad to see,
but we'll end that story there.Of course, that's the intentions in the
red seat have prompted major shipping companiesto take precaution measures to ensure the safety
of their vessels and career. Thegeopolitical situation, coupled with the strategic importance
(10:03):
of the Babble ministry, raises concernsby the potential long term impact on global
trade and slipping operations. And asthe situation unfolds, the shipping industry is
navigated, navigating uncharted waters, makingstrategic decisions to address the evolving challenges in
this critical maritime region. So let'smove on and talk about the US government
(10:28):
who who released the Consumer Prices andInflation Report earlier this month. Basic provides
insights into the US economy, thepotential for a soft landing, and the
current state of inflation. So todaywe'll discuss today's inflation numbers and their implications
for the bond market. So everyday this report is released is a big
(10:52):
day for US economic data. Righteach month, as inflation data emerges,
discussions arise about its implied patients,and will delve into some of those today.
We'll talk a little bit about keynumbers and methodological considerations that provide a
non understanding of the current economic landscapeand the possibility of a soft landing.
(11:15):
So the year on year inflation wasthree point one percent. The last time.
Around this time, it's about threepoint four percent. It's indicating that
inflation is persistent. The month ofmonth reading was zero point three percent,
i'll from zero point one previously.This suggests that while we're not returning to
the inflation high days, inflation isnot subsiding as quickly as some optimists had
(11:35):
hoped. It's essential to dissect thesenumbers to get a real comprehensive view.
So with the headline rate and encompassingall inflation price categories, we observed the
year on year rate remaining relatively stablefor several months. On the margin,
there might be a bit of optimisticnews in the core rate, which excludes
(11:56):
food and energy due to their volatility, and these character categories are influenced by
global commodity markets and some stories thatwe talked about earlier, you know,
things like that of that nature andgenerally don't provide a precise information or even
indication of the future inflation trends.So the core rate showed a slight decrease
(12:16):
on a year and year basis,dropping to three point nine percent in December
from November reading. But again we'retalking like very small difference hi by the
month of month reading was even abit harder the graph. You know,
to really grasp the real inflation picture, you need to delve deeper. A
couple of categories of inflation caught myattention. One notable category is goods prices.
(12:39):
In twenty twenty one, during thelockdown era, people went on a
shopping street buying items like xboxes,PlayStation cars, whatever. It was a
strange time, and now goods pricesskyrocket. However, throughout twenty twenty three
we experienced the opposite goods deflation,a correction from the excess of the luckdown
era. In the US, peoplewere getting stimless checks, you know,
(13:01):
free money. In Australia, youknow, the government's also giving a lot
of people extra support, so there'sa lot of money been pumped into the
economy. Right in December, thegoods deflation seemed to halt, with CPI
goods showing no change in prices ona month over month basis, as shifted
(13:22):
from falling prices in recent months.Now this is significant considering it was a
substantial source of deflationary pressure and wasviewed as a potential tailwind for the FED.
Another noteworthy category is a situation withcar pairs a services category that has
raised concerns due to his prolonged hightemperatures. In December, it finally sought
(13:43):
in decline, with the price ofcar pairs dropping by zero point two five
percent the first month over month declinedsince marks twenty twenty two. Service inflation,
especially in categories like car payers,has been a concern for the FED
because they perceive it as a potentiallyas potentially more resisting or explore moving than
(14:05):
goods inflation, which has recently reverseddramatically, And the fact that we're finally
witnessing a turnaround, even if minorin these hot service categories like car payers,
could be a positive signal for theFED. Now, I would say
that's the most important category by far, but it's been a bit of an
(14:26):
enigma, right, So, ifI have to say, generally speaking,
when looking at shelter inflation, wererefer into rents primarily, and this includes
something called owner's equivalent rent, wherethe government estimates what you would pay for
rent for a house you own,right, encompassing a broad spectrum of housing
(14:50):
costs in the economy. These costshave been high for an extended period.
As everyone knows, rent serves rentsserved during what post COVID. There were
expectations widespread a couple of months agothat this trend would reverse. Indices from
private apartments, markets on apartment lists, and ZULO, reflecting more timely view
(15:11):
of the rental market, have showna consistent decline for almost a year.
Analysts anticipated the CPI data to fallowsuit. While it has decreased slightly month
over month, in December, shelterinflation rose by a zero point five percent,
maintaining levels similar to most of twentytwenty three after a slide drop earlier
(15:31):
in the year. Now progress isn'tas significant as anticipated, though most expect
the decline eventually, but it allpaints a picture of inflation that inflation is
simply not going away. Some voicesin financial markets are celebrating the defeat of
inflation. I was too earlier.We were expecting to want of rate touch
(15:52):
this year, but and we're thinkingof thriving markets or whatever. But the
data points, like you know,these suggest re evaluation of our position,
right, and these situations might bea little bit more dramatic then we put
in them out to be. Sothe current market dynamics seem to revolve around
government bonds, influencing in various aspects. The bond market has been quite all
(16:21):
over the place in recent months.You know, over the summer, as
inflation persisted and central banks vituated theirstands, bond prices felt sharply, leading
yields to climb as high as fivepercent on the ten year US Treasury and
subsequently, as data indicated a coolingof inflation. Right reaching the current point
where we are today, yields plummeted, and particularly in December when defend hinted
(16:45):
at potential rate cuts, there's significantreversal from the five percent work. So
now at this point where many we'rehoping for a decisive market move based on
monster inflation numbers even much higher,to either much higher or much lower than
anticipated. While that hasn't happened,we do see a slide pickup and yields.
This suress that the market might havebeen a bit too optimistic before the
(17:07):
end of the year, also begetting ahead of itself regarding what the Fed
is likely to deliver in twenty twentyfour. So again and again, I
think we're left in the same situation, right, We're just we're fed.
We're in this situation. Whe're FEDdata dependent, so living from one set
of numbers to the next, andthat's the only way to navigate these markets
at the moment. Unfortunately, tobe honest, it's you know, it's
(17:33):
it's pretty boring to be honest,but it's been a long time. Market
is just hanging on whatever the datasays and really falling into the trap of
recency bias because they know that theFED is doing the exact same thing.
I will say, you know,I've noticed in my conversations with my peers,
my friends, some other analysts,even market participants that just touch a
(17:56):
more conviction in the past. I'llcall this a three months as sort of
the soft landing consensus as formed asinfusion data. You know, it hasn't
resolved itself, but it's becoming lessthreatening. I'll say, there's less upside
risk for inflation. So that's that. Then let's end off quickly with some
(18:17):
crypto news. So the US Securitiesand Exchange Commission, Okay, the first
spot exchange traded funds, yes,or on the tenth so yeah, a
few days ago. So but thistime it was for real, right,
So on Tuesday, there was actuallysomeone that hacked the SEC's x account and
(18:40):
posted a fake update that the Commissionhad proofed Bigcoin ets and Marcus obviously rallied
and then quickly reversed on the newsthat it was fake and the actual announcement
came on the tenth and it wasa huge movement, huge moment for crypto
fans like myself when we're really badthat ETFs will bring in new investors to
(19:00):
the market. Now Bigcoin ETF willbe an exchange traded fund that invests in
bitcoin. So at the moment,for a lot of customers in the US,
actually, if you want to investin bigcoin, it's pretty hard just
because of there aren't many digital wallsavailable for people in the US and for
(19:21):
people to know to ky C andwhatnot. But in general, if you
want to invest in bitcoin, thisis for all people in will be right.
So, if you want to investin bitcoin, you need to have
a digital wallet, you need togo to a specialized trading platform. And
we've seen some problems happen with theseplatforms and thinking FTX, right, but
you go to these not for ETFs. You don't really have to go and
(19:45):
deal with exchanges like FTX, justgo to an organization you're familiar with,
you know, think black Rock,and these issue publicly traded securities, so
it gives you the exposure to theprice moans of bitcoin, but you're also
investing in something that is traded out. Leading up to this has been a
very long story. I think wecovered ETFs I think last year, so
(20:07):
a little background. There is alot of high and deserved these so because
for a long time we've had thissort of standoff between regulators and financial institutions
who want to offer these products.The SEC have been very tough. You
know, they've been denying a lotof applications and hence the January is literally
the deadline for for for approval,so they literally waited to the last day
(20:30):
to approve of these ETFs. Sothere's a lot of you know, a
lot of heat last summer being denied, uh, Greyscale being denied. You
know, they wanted to convert abig coin trust into a big coin ETF.
The SEC then lost the court case. And when I lost this court
case, that's when the clock startedtaking and the assumption it was if they
(20:52):
lost that means approved with these bigcoin ETFs were coming. And how has
the SEC and is. Gary respondedto this and US regulators. Regulators are
really worried forced by market manipulation.Gary himself even posted a threat on x
laying out the concerns that he hasabout crypto investments, warning that it has
(21:15):
possibility of higher risk and volatility forinvestors, and they've sort of been backed
into a corner. You know,their approval will not necessarily mean the SEC
and US regulars think that these arevery good investment ideas. But I mean,
I'm not sure if you ask anyonewhat what does this mean for crypto?
It really depends on what side ofthe crypt line we've fallen, Right,
(21:38):
if you're a purist some people,you know, if you're actually purist
of cryptocurrencies, right, and blockchainand bigcoin, some some peerists believe that
you don't need to have issutions.You know, we don't need regulators or
the SEC governments because you know,you do without that, right. So,
in a strange way that you wereat this point in time of regulars
(22:00):
and the fascial intitutions are stepping inand co opting something that was actually designed
to cure them all out the wayin the wake of you know, financial
crisis. But now you're kind ofreally with an ETF. Bigcoin is more
likely to move with the market nownow that it's a publicly traded product,
(22:22):
which the Apple design of bigcoins tobe a hedge against the market. So
a lot of peersts have some somesome critics there, some some critiques there,
but I guess there's some sort ofcompromise right on both sides. If
you're pragmatic, if you're a bigcoininvestor, then you do hope that this
regulation will enlarge the marketing for thisdigital acid right and potentially mean price to
rise. So really it depends onwhat spectrum you're fall in, but all
(22:47):
in all, it is great news. We are expecting a lot of new
money flowing in, a lot ofnew investors with new eyes. The ETF
is said to be trained I thinkat eight percent premium, which is pretty
high, but I'm pretty sure thatshouldn't be touitive a problem hopefully. But
with that, I think that bringsus to the end of this podcast.
(23:10):
Thank you very much for tuning inand catching next time. Peace
Good afternoon, ladies and gentsmen.Welcome back to the Investor DIT podcast,
where we help you work smarter andharder by providing market updates and insights.
Today, I want to start discussionon global trade. There have been some
developments that have impacted global trade.There have been some ships being attacked in
Yemen, and of course people won'tget into the politics of it, but
(00:22):
more so the economic implications. Next, we'll talk a little bit about inflation
in the US. We'll have somecommentary on the recently released CPI inflation report,
and then end off with some cryptonews. So, the crypto world
are celebrating the approval of I thinkeleven bigcoin spot ETF, so we'll talk
(00:43):
a bit about what that means forbigcoin crypto in general, and you know
what ETFs are. So let's goon our first story. The Mediterranean Shipping
Company, which is the world's largestshipping company, has announced the diversion of
its ships away from the Red Seatdue to an increased threat of attacks.
Now, this decision falls similar movesby other major shipping companies, and they're
(01:07):
all navigating high intensions stemming from recentattacks by different military groups in Yemen.
Now, the Red Seat is avital root for oil and fuel shipments,
and it has now become a hotspotfor geopolitical tensions. Of course, this
comes from what's going on in Palestine, and so there's a lot of drones
(01:27):
being employed, rockets, and thesemilitary groups have intense fine attacks on foreign
owned vessels, prompting significant concerns withinthe shipping industry. Now, the canal
is called the Bab al Man Depthstraight right, and it's often referred to
as the Gate of Tears, andit's finding itself thrust into the global spotlight
(01:49):
as shipping giants are altering their roots, which signifies its rising significance in and
the complex challenge it poses. Now, this narrow channel sits between Yemen,
Jibouti and area and it serves asa critical route for ships traveling to the
Swiss Canal. Now, approximately seventeenthousand ships, about ten percent of global
(02:13):
trade passes through this strategic waterway annually. And now this decision to divert roots
implies longer journeys, increased costs,and potentially disruptions to the global supply chain.
Now let's talk a little bit aboutyou know, geopolitical vulnerabilities. I'm
I'm Somali, right, So anation that's acutely aware of the regional dynamics,
(02:38):
I observe that the Bible Manustrate isnot only a vital maritime passage but
also geopolitical hotspot. Now, Yemen, located to the north of Sawaya,
has been grappling with, you know, internal conflicts with different rebel groups targeting
ships in the Red Sea, andthe escalation of hostilities in this region really
amplifies concerns about the vulnerability of themaritime roots, prompting shipping companies to rethink
(03:00):
their strategies. Now, the BibleManimstrate serves as a crucial conduct for the
economies of the countries along the shores, including Smario, and any disruptions in
shipping activities through this waterway can havecascading effects on regional trade, potentially affecting
livelihoods and economics. Ability and thelonger routes taken by vessels avoiding the strait
(03:23):
may lead to increased transit costs,affecting the competitiveness of goods from the region
in the global market. So let'stalk a little about the global challenges of
global trade now, global trade heavilyrelies on efficient and secure maritime roots.
Any challenges posed to a key passagelike the Bibble Manustrate revertebrate globally. Now,
(03:46):
this decision by shipping giants to divertroutes indicates a recognition of strategic vulnerabilities
in the region. Longer journeys notonly translated into increased fuel costs, but
also pose logistical challenges, potentially disruptingthe intricate web of global supply chains.
Now, I'm a want to speculate, but looking ahead, it is plausible
(04:10):
to anticipate that the Babble Manustrate willcontinue to be a focal point of concern.
Of course, because this, thisconflict between is real, impass there's
no real you know, there's noreal end in sight. So I'm pretty
sure or I'm well, I hopenot. But it looks like, you
(04:31):
know, the conflict in in Yemenand and in the Red Sea specifically will
continue. And this geopolitical tension iscoupled with strategic importance of this waterway,
may prompt hide an international attention anddiplomatic efforts to ensure security. Now,
I foresee that the nation's bordering theright Sea and the Gulf of Aiden,
(04:56):
including Somario will play a crucial role. Well, they'll have have to in
shaping the geopolitical dynamics of the region. And just talking about Somalia's stake in
this, you know, being fromSomalia, I be recognized to interconnect the
nature of regional jew politics and itsimpact on the Horn of Africa and Somalia's
coastline along the Indian Ocean positions itself. You know, it's a it's a
(05:18):
key player in the maritime affairs ofthe region. The battle Mandum Straates challenges
underscore the importance of regional cooperation insafeguarding shared maritime interest. Now Somalia is
evolving political landscape may find itself payinga pivotal role in fostering stability and security
in these critical waters. So ifyou want to know, take a little
(05:41):
history lessons we learned from the pastto really gain a comprehensive understanding of what's
going on today. You know,one reason cannot overlook historical instances where trade
routes underwent similar challenges in parallel tothis is maybe is this smiss connect this
Swiss crisis of nineteen fifty six wheregeopolitical tangents led to the closure of the
(06:06):
whole canal, and the repercussions wereprofound. There's a serve and shipping costs
along trans times and then reshuffling ofglobal trade patterns, and now the current
situation echoes the importance of maritime routesand the vulnerability of global trade to disruptions
in key passages. So I've beentalking about costs going up, costs going
(06:29):
up, but let's break it down, right, So shipping experts are rediscrutinizing
the fallout, diverting roots from thebabble mandu straight emphasized epsides of multifaceted cost
considerations. Right, So the addedcruing, fuel, insurance expenses from all
these financial burdens for the companies evolvedand this entails meticulous analysis of the financial
(06:55):
impact of each aspect crewing costs influencedby the extended voyage durations present at presented
that direct economic burden, potentially leadingto adjustments in crucises or compensation structures.
Fuel expenses now are a significant componentin maritime operations as you can imagine,
and there are ployees to escalate dueto prolonged journeys and Now, the interger
(07:18):
relationship between fuel costs, level allprices and their impact on the overall shipping
industry requires a nonce examination. Furthermore, insurance premiums driven by highened geo political
risks could skyrocking, challenging the financialresilience of shipping companies. Now, let's
talk about economic implications beyond the shippingindustry. Right, so, shipping companies
(07:43):
obviously take a hit. What doesit mean for people on the outside.
Now, the suspension of operations bysome of the world's top shipping companies in
the bibleministry set in motion a dominanteffect across the broader economy that anticipated economic
implications encompass multiple dimes mentions ranging fromthe stock market dynamics to supply chain intricacies.
(08:05):
Investors are likely to witness fluctuations instock levels, mirroring the uncertainty surrounding
the strategic waterway. Cost Increases bornby shipping companies are often transferred to consumers.
Right, They're not going to haveyou put the burden on themselves.
What's going to happen is our pricesare going to go up, right,
(08:26):
And once they do this, theyform a crucial link in the economic chain.
As added expenses rippled through the supplychain, the end consumer newer me
may find ourselves facing higher prices forgoods. This anticipated economic repercussion assnuates the
interconnectness of global trade and the susceptibilityof consumers to disruptions in maritime roots.
(08:52):
So another prediction by me regarding thefuture directory of economic fallout, well,
well, i've read online right,some analysts make you know they have been
closely monitoring the duration of root diversionsand the gym political developments and diplomatic efforts
aimed at ensuring the security by maritimepassages. But I do feel that extended
(09:18):
disruptions could amplify economic consequences, potentiallyprompting nations and international organizations to intervene in
safeguarding the vital trade which has alreadystarted. You know, if you've been
following the news, there has beensome retaliation from them. So again then
(09:41):
one get too into that. Butit's happening and it's sad to see,
but we'll end that story there.Of course, that's the intentions in the
red seat have prompted major shipping companiesto take precaution measures to ensure the safety
of their vessels and career. Thegeopolitical situation, coupled with the strategic importance
(10:03):
of the Babble ministry, raises concernsby the potential long term impact on global
trade and slipping operations. And asthe situation unfolds, the shipping industry is
navigated, navigating uncharted waters, makingstrategic decisions to address the evolving challenges in
this critical maritime region. So let'smove on and talk about the US government
(10:28):
who who released the Consumer Prices andInflation Report earlier this month. Basic provides
insights into the US economy, thepotential for a soft landing, and the
current state of inflation. So todaywe'll discuss today's inflation numbers and their implications
for the bond market. So everyday this report is released is a big
(10:52):
day for US economic data. Righteach month, as inflation data emerges,
discussions arise about its implied patients,and will delve into some of those today.
We'll talk a little bit about keynumbers and methodological considerations that provide a
non understanding of the current economic landscapeand the possibility of a soft landing.
(11:15):
So the year on year inflation wasthree point one percent. The last time.
Around this time, it's about threepoint four percent. It's indicating that
inflation is persistent. The month ofmonth reading was zero point three percent,
i'll from zero point one previously.This suggests that while we're not returning to
the inflation high days, inflation isnot subsiding as quickly as some optimists had
(11:35):
hoped. It's essential to dissect thesenumbers to get a real comprehensive view.
So with the headline rate and encompassingall inflation price categories, we observed the
year on year rate remaining relatively stablefor several months. On the margin,
there might be a bit of optimisticnews in the core rate, which excludes
(11:56):
food and energy due to their volatility, and these character categories are influenced by
global commodity markets and some stories thatwe talked about earlier, you know,
things like that of that nature andgenerally don't provide a precise information or even
indication of the future inflation trends.So the core rate showed a slight decrease
(12:16):
on a year and year basis,dropping to three point nine percent in December
from November reading. But again we'retalking like very small difference hi by the
month of month reading was even abit harder the graph. You know,
to really grasp the real inflation picture, you need to delve deeper. A
couple of categories of inflation caught myattention. One notable category is goods prices.
(12:39):
In twenty twenty one, during thelockdown era, people went on a
shopping street buying items like xboxes,PlayStation cars, whatever. It was a
strange time, and now goods pricesskyrocket. However, throughout twenty twenty three
we experienced the opposite goods deflation,a correction from the excess of the luckdown
era. In the US, peoplewere getting stimless checks, you know,
(13:01):
free money. In Australia, youknow, the government's also giving a lot
of people extra support, so there'sa lot of money been pumped into the
economy. Right in December, thegoods deflation seemed to halt, with CPI
goods showing no change in prices ona month over month basis, as shifted
(13:22):
from falling prices in recent months.Now this is significant considering it was a
substantial source of deflationary pressure and wasviewed as a potential tailwind for the FED.
Another noteworthy category is a situation withcar pairs a services category that has
raised concerns due to his prolonged hightemperatures. In December, it finally sought
(13:43):
in decline, with the price ofcar pairs dropping by zero point two five
percent the first month over month declinedsince marks twenty twenty two. Service inflation,
especially in categories like car payers,has been a concern for the FED
because they perceive it as a potentiallyas potentially more resisting or explore moving than
(14:05):
goods inflation, which has recently reverseddramatically, And the fact that we're finally
witnessing a turnaround, even if minorin these hot service categories like car payers,
could be a positive signal for theFED. Now, I would say
that's the most important category by far, but it's been a bit of an
(14:26):
enigma, right, So, ifI have to say, generally speaking,
when looking at shelter inflation, wererefer into rents primarily, and this includes
something called owner's equivalent rent, wherethe government estimates what you would pay for
rent for a house you own,right, encompassing a broad spectrum of housing
(14:50):
costs in the economy. These costshave been high for an extended period.
As everyone knows, rent serves rentsserved during what post COVID. There were
expectations widespread a couple of months agothat this trend would reverse. Indices from
private apartments, markets on apartment lists, and ZULO, reflecting more timely view
(15:11):
of the rental market, have showna consistent decline for almost a year.
Analysts anticipated the CPI data to fallowsuit. While it has decreased slightly month
over month, in December, shelterinflation rose by a zero point five percent,
maintaining levels similar to most of twentytwenty three after a slide drop earlier
(15:31):
in the year. Now progress isn'tas significant as anticipated, though most expect
the decline eventually, but it allpaints a picture of inflation that inflation is
simply not going away. Some voicesin financial markets are celebrating the defeat of
inflation. I was too earlier.We were expecting to want of rate touch
(15:52):
this year, but and we're thinkingof thriving markets or whatever. But the
data points, like you know,these suggest re evaluation of our position,
right, and these situations might bea little bit more dramatic then we put
in them out to be. Sothe current market dynamics seem to revolve around
government bonds, influencing in various aspects. The bond market has been quite all
(16:21):
over the place in recent months.You know, over the summer, as
inflation persisted and central banks vituated theirstands, bond prices felt sharply, leading
yields to climb as high as fivepercent on the ten year US Treasury and
subsequently, as data indicated a coolingof inflation. Right reaching the current point
where we are today, yields plummeted, and particularly in December when defend hinted
(16:45):
at potential rate cuts, there's significantreversal from the five percent work. So
now at this point where many we'rehoping for a decisive market move based on
monster inflation numbers even much higher,to either much higher or much lower than
anticipated. While that hasn't happened,we do see a slide pickup and yields.
This suress that the market might havebeen a bit too optimistic before the
(17:07):
end of the year, also begetting ahead of itself regarding what the Fed
is likely to deliver in twenty twentyfour. So again and again, I
think we're left in the same situation, right, We're just we're fed.
We're in this situation. Whe're FEDdata dependent, so living from one set
of numbers to the next, andthat's the only way to navigate these markets
at the moment. Unfortunately, tobe honest, it's you know, it's
(17:33):
it's pretty boring to be honest,but it's been a long time. Market
is just hanging on whatever the datasays and really falling into the trap of
recency bias because they know that theFED is doing the exact same thing.
I will say, you know,I've noticed in my conversations with my peers,
my friends, some other analysts,even market participants that just touch a
(17:56):
more conviction in the past. I'llcall this a three months as sort of
the soft landing consensus as formed asinfusion data. You know, it hasn't
resolved itself, but it's becoming lessthreatening. I'll say, there's less upside
risk for inflation. So that's that. Then let's end off quickly with some
(18:17):
crypto news. So the US Securitiesand Exchange Commission, Okay, the first
spot exchange traded funds, yes,or on the tenth so yeah, a
few days ago. So but thistime it was for real, right,
So on Tuesday, there was actuallysomeone that hacked the SEC's x account and
(18:40):
posted a fake update that the Commissionhad proofed Bigcoin ets and Marcus obviously rallied
and then quickly reversed on the newsthat it was fake and the actual announcement
came on the tenth and it wasa huge movement, huge moment for crypto
fans like myself when we're really badthat ETFs will bring in new investors to
(19:00):
the market. Now Bigcoin ETF willbe an exchange traded fund that invests in
bitcoin. So at the moment,for a lot of customers in the US,
actually, if you want to investin bigcoin, it's pretty hard just
because of there aren't many digital wallsavailable for people in the US and for
(19:21):
people to know to ky C andwhatnot. But in general, if you
want to invest in bitcoin, thisis for all people in will be right.
So, if you want to investin bitcoin, you need to have
a digital wallet, you need togo to a specialized trading platform. And
we've seen some problems happen with theseplatforms and thinking FTX, right, but
you go to these not for ETFs. You don't really have to go and
(19:45):
deal with exchanges like FTX, justgo to an organization you're familiar with,
you know, think black Rock,and these issue publicly traded securities, so
it gives you the exposure to theprice moans of bitcoin, but you're also
investing in something that is traded out. Leading up to this has been a
very long story. I think wecovered ETFs I think last year, so
(20:07):
a little background. There is alot of high and deserved these so because
for a long time we've had thissort of standoff between regulators and financial institutions
who want to offer these products.The SEC have been very tough. You
know, they've been denying a lotof applications and hence the January is literally
the deadline for for for approval,so they literally waited to the last day
(20:30):
to approve of these ETFs. Sothere's a lot of you know, a
lot of heat last summer being denied, uh, Greyscale being denied. You
know, they wanted to convert abig coin trust into a big coin ETF.
The SEC then lost the court case. And when I lost this court
case, that's when the clock startedtaking and the assumption it was if they
(20:52):
lost that means approved with these bigcoin ETFs were coming. And how has
the SEC and is. Gary respondedto this and US regulators. Regulators are
really worried forced by market manipulation.Gary himself even posted a threat on x
laying out the concerns that he hasabout crypto investments, warning that it has
(21:15):
possibility of higher risk and volatility forinvestors, and they've sort of been backed
into a corner. You know,their approval will not necessarily mean the SEC
and US regulars think that these arevery good investment ideas. But I mean,
I'm not sure if you ask anyonewhat what does this mean for crypto?
It really depends on what side ofthe crypt line we've fallen, Right,
(21:38):
if you're a purist some people,you know, if you're actually purist
of cryptocurrencies, right, and blockchainand bigcoin, some some peerists believe that
you don't need to have issutions.You know, we don't need regulators or
the SEC governments because you know,you do without that, right. So,
in a strange way that you wereat this point in time of regulars
(22:00):
and the fascial intitutions are stepping inand co opting something that was actually designed
to cure them all out the wayin the wake of you know, financial
crisis. But now you're kind ofreally with an ETF. Bigcoin is more
likely to move with the market nownow that it's a publicly traded product,
(22:22):
which the Apple design of bigcoins tobe a hedge against the market. So
a lot of peersts have some somesome critics there, some some critiques there,
but I guess there's some sort ofcompromise right on both sides. If
you're pragmatic, if you're a bigcoininvestor, then you do hope that this
regulation will enlarge the marketing for thisdigital acid right and potentially mean price to
rise. So really it depends onwhat spectrum you're fall in, but all
(22:47):
in all, it is great news. We are expecting a lot of new
money flowing in, a lot ofnew investors with new eyes. The ETF
is said to be trained I thinkat eight percent premium, which is pretty
high, but I'm pretty sure thatshouldn't be touitive a problem hopefully. But
with that, I think that bringsus to the end of this podcast.
(23:10):
Thank you very much for tuning inand catching next time. Peace
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