Rising Italian Yields and the Looming Debt Question: What Lies Ahead for Eurozone?
The 10-year Italian yield has reached its highest level since March, while the difference between the 10-year Italian and German yields is trading above 180bps for the first time since June. Beyond speculating on whether the ECB will raise interest rates to 4% or not, the significance of Italy's debt burden should be a fundamental concern, especially if they announce a new tightening of their monetary policy by ending reinvestments in their PEPP program or, worse still, making further disinvestments under the APP program.
Today is ECB day
What is the Taylor rule telling us when it comes to theoretical interest rates based on German data? Key interest rate should be at 10.9%, so 6.6% higher than current rate, according to Taylor Rule with German inflation at 6.4% & unemployment below NAIRU. Howeverm the spread between Taylor Rule rate & ECB key rate is lower than it has been since 2021. This might suggest that hike cycle could soon come to an end. Source: Bloomberg, HolgerZ
Goldman expects the resumption of student loan payments, a potential temporary federal government shutdown, and reduced auto production from a potential UAW strike to slow US GDP growth in 4Q23
Source graphic: GS
This chart from Bloomberg shows the massive supply shortfall oil markets will face next quarter
OPEC expects a supply shortfall of more than 3 million barrels per day. If OPEC is correct, it would result in the biggest inventory drawdown since 2007. Voluntary production cuts by OPEC members are removing 1.3 million additional barrels of oil supply every day. Higher oil prices are back and the US reserves are at record lows. Source: Bloomberg, The Kobeissi Letter
Yesterday, the $LVMH-backed iconic sandal-maker Birkenstock filed for its NYSE IPO!
With a 250-year history and a product that has been cheaply imitated for decades, $BIRK's 20% revenue CAGR over the last eight years is very impressive. Looking at profitability, Birkenstock actually has 60% gross margins, and its EBIT margins reached as high as 29% in FY22. In 2021, Birkenstock was acquired by the private equity firm L Catterton for $4.3B. Together with Bernard Arnault's family holding company Groupe Arnault, LVMH owns 40% of the ~$30B firm. The rumored valuation of ~$8B would imply an EBIT multiple somewhere around 20x, using the company's FY22 numbers. Source: Quartr
Stock Market: "We don't need central banks anymore, we have AI"
Source: Jeffrey Kleintop
Thankfully, the US is a country where the President has very little impact on the stock market
Stocks tend to go up during most presidencies, regardless of who is in power. Key takeaway: Don't mix politics with your portfolio. Source: Charlie Bilello
German builders warn of crisis as they scrap record number of projects
According to a FT article, cancelled building projects and financial distress among landlords and builders in Germany have hit their highest levels since reunification three decades ago, intensifying the construction crisis in the EU’s biggest economy. Hit by rising interest rates, soaring costs and weaker demand, 20.7 per cent of construction companies said they had been forced to scrap a project in August, up from 18.9 per cent in the previous month, according to a survey of 500 businesses by researchers at the Ifo Institute in Munich. Source: https://lnkd.in/etkDryVY
