5 Minute Chart from FINVIZ of Dow 30 showing my prediction of last night is taking place as can be seen by my Forex trading results and the attached chart.
https://finviz.com/futures_charts.ashx?t=YM&p=m5
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Blain’s Morning Porridge Feb 20th: Central Banks, Recession landing risks, and why China is the issue to watch
“A great landing in one when you can fly the plane the following day..”
This morning: The market is talking about a no-landing scenario – but should be watching what Central Banks are saying, and China’s position re Ukraine. The market remains vulnerable to recession and rising geopolitical tensions. They are very closely linked.
Last week the market was weighing up a soft-landing vs hard landing – to what degree a global recession might be skirted. Last Monday I was writing about Fairy Tales, specifically The Three Bears, and how the market is hoping we’ll be getting Baby Bear’s porridge: not too hot, not too cold – but just right. Bloomberg might have been reading me – my good chum Anthony Peters heard a TV anchor say: “They just murdered Goldilocks” when Fed Hawk Loretta Mester firmly laid down the line: “the fight against inflation is not done, and Fed Funds are heading higher.”
Pretty clear signal the Fed is not about to “pivot”… to use the most misused word of the decade! But, as usual, if all we are worried about are the trees of inflation, rates, yield curves and bond yields, then we are missing the real issues: the forest that is the global economy!
What external forces could trigger global slowdown and a deeper recession? For that you need to read the runes on yesterday’s spat between US secretary of State Anthony Blinken, and Chinese Diplomatic Chief Wang Yi in Munich. There is a lot of posturing underway. How geopolitics plays out is probably as important for global growth as what the Fed, ECB and Bank of England do on rates.
In recent days the market’s narrative has shifted. The commentariat is now talking about the “No Landing” scenario. This apparently means the global economy bounces around with high employment, annoyingly persistent (but not deadly) inflation, and no recessionary outcomes… Such a rosy outcome will occur on the back of China’s reopening, the resilience of western economies, easier energy costs, plus rising post-Covid consumption patterns all combining to power the global economy through this uncertain patch.
Really? What if that much anticipated China boost doesn’t happen because of a deepening Cold War?
This morning I participated in an economic expectations survey on Bloomberg giving the choice of a soft, hard, no-landing or the global economy flying into a mountainside.
None of these are necessarily where we end up… but sure its engaging stuff.. Apparently the no-landing outcome is the most likely…
To be honest.. No Landing sounds like a market convincing itself of upside when the picture remains one of economic grief. There are a couple of key economic determinants missing from the rosy “no landing” picture. We may well miss a global recession, but not because the market hopes for it. We need to understand why the market looks increasingly convinced a no-landing may happen.
In uncertain will-they/won’t-they markets – like today, and immediately following 2022, a dismal year for markets… there are lots of market participants desperately trying to get rich again and show just how clever their investment strategies are. In fervid miasmic markets it only takes a few days for the malarial pestilence of irrational exuberance to embed itself, triggering an outbreak of FOMO: fear of missing out.
Bear Rallies can be stubbornly persistent. Out there… somewhere east of common sense, there are still folk who think ButtCoin is going to $1 million, Cathie Wood is an investment genius, Elon Musk slashing the price of cheapest Tesla makes it the most valuable company on the planet, that Central Banks exist to save markets, and the Tooth Fairy runs a hedge fund. Dream on.
The reality? Work out what others are deliberately not seeing. Start with what central banks are actually doing:
What’s likey to set the market tone for the rest of 2023 is two factors:
Big news over the weekend was the American’s saying the Chinese are going to start supplying Russia with ammunition. While Blinken and diplomat Yi were hurling insults at each other over balloons, the key issue is how to avoid a global slowdown a new cold war between China and the West would create.
It’s all about Ukraine. When the war broke out, almost one-year ago, the West expected widespread global condemnation of Russia for invading another nation to impose its will upon a people who had the temerity to democratically elect a government Putin disliked. Instead, much of the non-aligned world, and previously US leaning powers, particularly in the Gulf, chose not to support the West. They expected a tired and discredited US (embarrassed by the Afghan pull-out), the potential of a weaker dollar, and the Energy insecurity of Europe, would see the Russians quickly triumph, confirming a shift in global geo-political power away from the US towards China.
As we know, that’s not how it’s played out. Ukraine has proved the more resilient nation. Russia looks increasingly weak. One year after the war began Ukraine survives, and the West is gradually getting its act together to defend Ukraine. It looks likely to remain a long, drawn-out, bloody affair – dare I write stalemate?
The ball in now in China’s court.
If China declines to meaningfully supply Russia, that’s further humiliation for Putin but an opportunity for China to re-engage with the west – suiting President Xi’s kitchen-sink approach to reopening and growing the post-Covid Chinese economy. Not supplying Russia would also potentially suit the Chinese who will have seen how quickly Ukraine and Russia have burnt through war stocks, and how the Russians have underperformed on the field. China will have absorbed these lessons about command and control, and logistics, and factored these into its planning re Taiwan – and knows it will take years to effect changes in the People’s Liberation Army.
It’s a simple choice for Xi:
The Russian planners (assuming there was much planning) assumed the West was hostage to Russian energy. The exceptionally mild winter has put paid to that. Over the weekend we were out for a walk wearing t-shirts, the daffodils are out a fortnight early, birds are nesting, and trees are budding. General Winter never showed up for Russia.
Although Europe will still struggle with energy insecurity – it’s not the only issue. There was a fantastic article on global chip supplies, and how a war in Taiwan will make Covid and Ukraine look like pleasant picnics. Now, that might get Xi thinking…
Uncertain times.. I am keeping my gold positions in place..
Five Things to Read Today:
Politico Blinken and China’s top diplomat spar over spy balloon incident
FT Investors pour record sums in high-grade corporate bonds
BBerg Soft, Hard or No Landings? Have your say
WSJ Abu Dhabi to sell 4% of Gas Business in IPO
Guardian “Greenwashing” firms face steep new UK fines
Out of time, and back to the day job..
Bill Blain
Strategist – Shard Capital
The key question is this: does the Fed keep going until they break things; or do they stop and admit 3-4% CPI is good enough?
Both of those outcomes imply the end of the world as we have long known it in markets. The first is an argument for bear flattening in bonds, a collapse in everything except bonds, and of everything against the dollar. The second implies bear steepening in bonds, a rally in everything else as an inflation hedge, and a collapse of the dollar against everything else.
So, back to Munich. This key security conference was covered by Bloomberg, but desperation to believe the world they represent is not ending saw its headline writers spin that the US and China were “talking". Yes - except the US accused Beijing of unacceptable behavior over spy balloons and claimed China is considering providing "lethal support" to aid the Russian invasion of Ukraine. China effectively called the US a warmonger while trying to woo Europe, and on Sunday warned the US it would "bear all the consequences" if it escalated the balloon further.
Moreover, US talk about Russia was equally confrontational. Vice-President Harris accused Moscow of crimes against humanity, climbing a ladder that will be very hard to come down from. UK Prime Minister Sunak is lobbying to send Ukraine the most advanced NATO weapons. China will release its peace plan on the first anniversary of the war on Friday: the West is skeptical.
This matters as the geopolitical are now geoeconomic. NATO chief Stoltenberg directly stated Europe’s dependency on Russian gas was dismissed as being economic, not security-related before February 2022 and that the EU should not make the same mistake with China, or others, by depending on their raw materials or exporting key technologies to them. Of course, such talk is cheap. Indeed, geopolitical thinker Michta noted in a somber analysis:
“Was this what 1938 felt like before the German Nazi rape of Czechoslovakia? Satiated countries in the West issuing solemn assurances to Prague and others, but knowing deep in their bones that those checks would not be cashed? Because it was somebody else’s business, not ours?...
Rhetoric is not policy. I’ve sat through too many discussions where everything has been said but not by everyone, so we droned on… It’s not rocket science. It’s about spending the money to produce weapons and munitions so we can send them to Ukraine. It’s about agreeing what the end state should look like not for Ukraine, but for all of us. It’s about imagination, leadership, and courage.”
It is also about supply chains, on/friend-shoring, massive defense spending, capital controls – and then inflation and interest rates. One can no longer look at the latter in isolation.
Relatedly, Senator Hawley just gave a speech ‘China and Ukraine: A Time for Truth’ hammering home that the US cannot do what is it doing in Ukraine and step up in the Pacific, and arguing Europe must defend itself --and Ukraine-- now. Neither Europe nor markets grasp the tail risk of what this shift in US stance would entail, just as they ignored Trump in early 2016, and didn’t read Marx ahead of China’s Common Prosperity. Even for the US, Hawley claims:
“Suppose China invades and seizes Taiwan. We try to stop it, but our forces are defeated and the island is lost. What would that mean?... Americans will confront a new, terrifying reality. Every American will feel it. The price hikes and disruptions we’ve seen in recent years will pale in comparison. Product shortages will be commonplace - shortages of everything from basic medicine to consumer electronics. According to some estimates, a war over Taiwan would send us into a deep recession with no clear way out, since huge swaths of our economy run on Taiwanese semiconductors. But the economic consequences are just the start.
If China takes Taiwan, it will be able to station its own military forces there. It can then use its position as a springboard for further conquest and intimidation - against Japan, the Philippines, and other Pacific islands, like Guam and the Northern Marianas… As Asia’s new reigning power, China could restrict US trade in the region - perhaps block it altogether. Maybe we’ll be allowed in, but only on terms favorable to China. China exploited the trading system once before. They can do it again…
Imagine a world where Chinese warships patrol Hawaiian waters, and Chinese submarines stalk the California coastline. A world where the PLA has military bases in Central and South America. A world where Chinese forces operate freely in the Gulf of Mexico and the Atlantic Ocean.” Hawley’s proposed solution to prevent this “dark future” is “a nationalist foreign policy. A foreign policy in the spirit of Alexander Hamilton and Theodore Roosevelt. A nationalist foreign policy places America’s interests first. And deterring China from seizing Taiwan should be America’s top priority.”
Meanwhile, today’s headlines are also that inspectors say Iran’s uranium processing has almost reached nuclear weapons-grade purity (as they stand next to Russia and China); and North Korea just tested both short-range missiles and an ICBM that might soon be capable of holding a nuke. Both developments make urgent US, and European, action more likely. I don’t mean rate cuts.
One does not have to worry about the end of the world per se, but the world we knew is ending: in geopolitics; geoeconomics; monetary policy; and, with a lag, markets
Q3 F2023 Financial Review
For the three months ended December 31, 2022, revenue from digital currency mining was $14.1 million, a decrease of approximately 51.6% from the prior year primarily due to the Merge, significant global hashrate growth combined with much lower average cryptocurrency prices.
Gross mining margin1 during the period was $3.6 million, or 25% of income from digital currency mining, compared to $15.9 million, or 54% of income from digital currency mining, in the same period in the prior year. The Company’s gross mining margin1 from digital currency mining is partially dependent on external network factors including mining difficulty, the amount of digital currency rewards and fees it receives for mining, as well as the market price of digital currencies. The decrease in gross mining margin1 is greatly affected by the price of digital currencies which is approximately 67% of what it was in the prior year quarter.
The Company notes that, while adjusted EBITDA1 this quarter was $1.5 million, because of mark to market accounting practice, net loss during the quarter ended December 31, 2022, was $90.0 million, or a loss of $1.09 per share, compared to net income of $51.2 million, or $0.66 per share, the same period last year. The decline from the prior year was driven primarily by the Merge, higher non-cash charges such as depreciation, unrealized valuation losses on digital currencies and investments, and impairment charges on equipment and equipment deposits, which in turn were all affected by lower Bitcoin and Ethereum prices seen in the current quarter. Adjusted EBITDA is a non-IFRS financial measurement and should be read in conjunction with and should not be viewed as an alternative to or replacement of measures of operating results and liquidity presented in accordance with IFRS.
Mr. Holmes noted, “At HIVE we strive to maintain a high-performance culture, which means that we always adapt to unexpected headwinds, and do our best to maintain operational excellence in the process.”
https://mcusercontent.com/7acec64055...52a996db7e.png
EBITDA and Adjusted EBITDA
The Company uses EBITDA and Adjusted EBITDA as a metric that is useful for assessing its operating performance on a cash basis before the impact of non-cash items and acquisition related activities.
EBITDA is net income or loss from operations, as reported in profit and loss, before finance income and expense, tax and depreciation and amortization.
Adjusted EBITDA is EBITDA adjusted for removing other non-cash items, including share-based compensation, non-cash effect of the revaluation of digital currencies and one-time transactions.
https://mcusercontent.com/7acec64055...5dc5b37862.png
The Company emphasizes that “adjusted EBITDA” is not a GAAP or IFRS measurement and is included only for comparative purposes.
Non-Cash Charges
A non-cash charge is a write-down or accounting expense that does not involve a cash payment. Depreciation, amortization, depletion, stock-based compensation, and asset impairments are common non-cash charges that reduce earnings but not cash flows.
Financial Statements and MD&A
The Company’s Consolidated Financial Statements and Management’s Discussion and Analysis (MD&A) thereon for the three and nine months ended December 31, 2022 will be accessible on SEDAR at www.sedar.com under HIVE’s profile and on the Company’s website at www.HIVEblockchain.com.
HIVE Performance Cloud
HIVE is also pleased to announce its anticipated plans to launch HIVE Performance Cloud in calendar Q2 2023.
Prior to the full-scale launch of HIVE Cloud, we are also pleased to share that our proof-of-concept to utilize our fleet of GPUs is currently produced annual revenue on a run-rate basis over $1 million, doing high performance computing workloads (not involving digital asset mining).
“One year later, Kyiv stands. And Ukraine stands. Democracy stands,” he declared. “The Americans stand with you and the world stands with you.”
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