Interim Update September 6: Intriguing Emerging Trends

[SOL]

Any comments on the latest sentiment readings Sol?

Quite a large jump from the bullish camp to neutral which would normally indicate uncertainty which is bullish.

Bullish readings came in at 38, just 0.5 below the historical average. So, it's essentially Yo-Yo action, which isn't good in the short term, as it shows people are attempting to time the markets. There is too much "make it big or go broke" syndrome in the markets today.

Until there is a clear signal, we will continue to deploy money in measured lots in unfavored and disliked sectors. I like Palladium and Uranium. Coal, Copper, Lithium, etc., as mentioned before, all look very attractive.

I have to say it again; what everyone is missing are the open yet hidden overtones taking place in the world's commodities markets. The West is not ready for a resource war. Let's hope it does not start, but more nations are putting up roadblocks to exporting raw materials; they want to sell finished products.

[bpcw]

Any comments on the latest sentiment readings Sol?

Quite a large jump from the bullish camp to neutral which would normally indicate uncertainty which is bullish.

Bullish readings came in at 38, just 0.5 below the historical average. So, it's essentially Yo-Yo action, which isn't good in the short term, as it shows people are attempting to time the markets. There is too much "make it big or go broke" syndrome in the markets today.

Until there is a clear signal, we will continue to deploy money in measured lots in unfavored and disliked sectors. I like Palladium and Uranium. Coal, Copper, Lithium, etc., as mentioned before, all look very attractive.

I have to say it again; what everyone is missing are the open yet hidden overtones taking place in the world's commodities markets. The West is not ready for a resource war. Let's hope it does not start, but more nations are putting up roadblocks to exporting raw materials; they want to sell finished products.

Thanks Sol, I have exposure to palladium, copper, oil and PM's.

[MarkD]

https://futurism.com/the-byte/lithium-f ... gest-cache

First the USA announces large titanium supply in Tennessee, now lithium. They have known all along. Just like clean coal.

The question is whether or not it will be allowed to be mined.

We have plenty of natural resources in the United States, but here's the crucial question: Do we have the right people to make the most of them? Opening a mine can be a long journey, but without skilled workers, it won't happen. The US is facing a labour shortage in the resource sector.

My view on immigration, illegal or not, is to provide folks who will do the work indigenous refuse to consider. Mining and military fit that profile. Plus, in the beginning they work for less. I have seen this in construction and manufacturing on all scales throughout my career.

[SOL]

https://futurism.com/the-byte/lithium-f ... gest-cache

First the USA announces large titanium supply in Tennessee, now lithium. They have known all along. Just like clean coal.

The question is whether or not it will be allowed to be mined.

We have plenty of natural resources in the United States, but here's the crucial question: Do we have the right people to make the most of them? Opening a mine can be a long journey, but without skilled workers, it won't happen. The US is facing a labour shortage in the resource sector.

My view on immigration, illegal or not, is to provide folks who will do the work indigenous refuse to consider. Mining and military fit that profile. Plus, in the beginning they work for less. I have seen this in construction and manufacturing on all scales throughout my career.

I concur regarding regular labour, but when it comes to specialized labour, it's a different story. For instance, in a coal mine, you would require...


1. Geologists: They assess the geological conditions of the mine, helping to locate and determine the quality of coal deposits.

2. Mining Engineers: Responsible for designing and planning the mine layout and overseeing extraction methods.

3. Environmental Specialists: Ensure compliance with environmental regulations and minimize the impact of mining on the surrounding ecosystem.

4. Safety Inspectors: Monitor safety protocols to prevent accidents and ensure the well-being of mine workers.

5. Equipment Operators: Operate heavy machinery such as bulldozers, excavators, and conveyor systems used in coal extraction.

6. Maintenance Technicians: Perform regular maintenance and repairs on mining equipment to keep it running smoothly.

7. Miners: Workers who physically extract coal from the mine. This may include drillers, blasters, and machine operators.

8. Surveyors: Measure and map the mine's layout to guide mining operations accurately.

9. Logistics and Transport Specialists: Oversee the transportation of coal from the mine to processing facilities or end-users.

10. Administrative Staff: Handle paperwork, permits, payroll, and other administrative tasks related to the mine's operations.

11. Healthcare Professionals: Provide medical care and emergency response services to mine workers.

12. Firefighters and Rescue Teams: Trained to respond to emergencies, such as fires or mine collapses.

13. Quality Control Inspectors: Ensure the coal extracted meets quality standards before shipment.

While some positions may be filled with inexpensive labour, recruiting individuals with specialized skills is not as readily achievable on short notice.

[SOL]

The corporate bond A/D data I maintain has dropped back to the lows of October 22.

https://ibb.co/3r8cwtV

And then you have this



According to recent warnings from researchers at the Federal Reserve, there are concerns about potential disruptions in the U.S. Treasuries market due to the resurgence of a popular hedge fund trading strategy. This strategy, known as basis trades, involves short positions in Treasuries futures contracts. These short positions have reached record highs and are being utilized by macro hedge funds with relative value strategies.

The Federal Reserve economists have highlighted the financial vulnerability risks associated with these trades, especially considering the current volatility in the U.S. government bond market due to higher interest rates and uncertainty surrounding future monetary policy actions. They have cautioned that cash-futures basis positions could be exposed to stress during broader market corrections, and they recommend continued monitoring of these trades.

Additionally, the economists have warned about the risk of a rapid unwind of basis trade positions if there are higher repo funding costs. This could contribute to increased Treasury market volatility and amplify dislocations in the Treasury, futures, and repo markets.

It is worth noting that the Federal Reserve does not have direct regulatory oversight over hedge funds, so the approach they take to address these basis positions may not be straightforward.

Some market players are concerned that the unwinding of basis trades could lead to illiquidity in Treasuries, similar to what happened in March 2020 during the onset of the coronavirus pandemic. Barclays has highlighted the vulnerability of cash futures basis trades to higher margin and financing costs.

In summary, if bond traders who have taken short positions in Treasuries futures are caught off guard and bonds rally, they could face significant trouble and potential losses. The Federal Reserve is aware of the risks associated with these trades and may take action to prevent a repeat of market turmoil.https://finance.yahoo.com/news/fed-econ ... 15173.html

[MarkD]

We have plenty of natural resources in the United States, but here's the crucial question: Do we have the right people to make the most of them? Opening a mine can be a long journey, but without skilled workers, it won't happen. The US is facing a labour shortage in the resource sector.

My view on immigration, illegal or not, is to provide folks who will do the work indigenous refuse to consider. Mining and military fit that profile. Plus, in the beginning they work for less. I have seen this in construction and manufacturing on all scales throughout my career.

I concur regarding regular labour, but when it comes to specialized labour, it's a different story. For instance, in a coal mine, you would require...


1. Geologists: They assess the geological conditions of the mine, helping to locate and determine the quality of coal deposits.

2. Mining Engineers: Responsible for designing and planning the mine layout and overseeing extraction methods.

3. Environmental Specialists: Ensure compliance with environmental regulations and minimize the impact of mining on the surrounding ecosystem.

4. Safety Inspectors: Monitor safety protocols to prevent accidents and ensure the well-being of mine workers.

5. Equipment Operators: Operate heavy machinery such as bulldozers, excavators, and conveyor systems used in coal extraction.

6. Maintenance Technicians: Perform regular maintenance and repairs on mining equipment to keep it running smoothly.

7. Miners: Workers who physically extract coal from the mine. This may include drillers, blasters, and machine operators.

8. Surveyors: Measure and map the mine's layout to guide mining operations accurately.

9. Logistics and Transport Specialists: Oversee the transportation of coal from the mine to processing facilities or end-users.

10. Administrative Staff: Handle paperwork, permits, payroll, and other administrative tasks related to the mine's operations.

11. Healthcare Professionals: Provide medical care and emergency response services to mine workers.

12. Firefighters and Rescue Teams: Trained to respond to emergencies, such as fires or mine collapses.

13. Quality Control Inspectors: Ensure the coal extracted meets quality standards before shipment.

While some positions may be filled with inexpensive labour, recruiting individuals with specialized skills is not as readily achievable on short notice.

I wholeheartedly agree but provide the following based upon my experience.

1. Geologists are plentiful and mostly underemployed, have been for years. They are high priced technicians in many consulting firms and government. There are also some in the petro industry with capability to transition.

2. Mining Engineers are a bit of an issue. The transition away from domestic production began a generation ago. I recall the son in law of some friends who graduated at the time of the housing crisis in 2008. He transitioned into other engineering work. Like geologists, this individual and others can be redeployed, however, it will be costly (good for him). The exact same thing happened to petroleum, chemical, chemists, etc., in the 1980s, when the oil cartel was broken. I know dozens of these types of folks who transitioned to defense and consulting. That includes some who had worked in heavy equipment manufacturing (CAT, DE) as mining operations for oil shale development ended.

3. Environmental specialists. We have too many already and they all seem to be in regulatory positions creating havoc for American industry.

4. Safety Inspectors are not necessarily career educated in schools as I personally know half dozen who came from diverse backgrounds to meet OSHA "competent individual" definitions. OTJ is and has been sufficient from corporate to the field operations. Crafts, business degrees, basic science, admin have all performed this work in my experience.

5/6/7. These are the jobs immigration can provide, as they are also OTJ type skills. It will take the right individual but it has and will continue to be manageable.

8. Surveyors are available.

9. Logistics personell should just contact Yellow Roadway. The industry is full of personnel.

10. Administrative personnel are everywhere. Maybe that's why the lockdowns occurred, to get a younger generation out of the office and into the countryside where the new work will take place. No more lattes at the corner, just work and income. And better schools for their children.

11. Healthcare pros are available.

12. Fireffighters etc same.

13. QC are available.

I come from a background where I have seen all of this occur before. The former state of residence has a mining school still in business. My hometown was a mining company town.

If the USA is going to go back to work then the mentality of foiks has to change. We can do this transformation if we can place useless windmills all over the landscape. Most folks want a place to call home for their family and as factories become more automated there is an opportunity. Management is full of idiots but I could sell this reality.

[MarkD]

A stock for TI to consider is ARLP.

[SOL]

I wholeheartedly agree but provide the following based upon my experience.

Experience trumps everything else, so I will defer to you. The one area on which we can both agree is whether today's workforce will have the wherewithal to accomplish this. It appears that we live in a time where people desire rewards without putting in the necessary effort, perhaps even expecting something for nothing, and potentially expecting to receive benefits without effort as well.

[SOL]

A Modest Shift, Yet the Winds of Change Linger

Bullish sentiment is currently at 33, just 5 points below the previous reading. To put this in context, the historical average is around 38.5. What's noteworthy, though, is the prevalence of neutral sentiment at 36, which is higher than the bearish sentiment reading of 31.

The potential for a surge in neutral sentiment is intriguing, as it would indicate an extended period of uncertainty. However, it needs to approach or reach a level near 55 to validate this outlook. So, as long as we don't see significant increases in bearish or neutral readings, market volatility will persist. A substantial surge in fear is required and will likely coincide with a market bottom.

[SOL]

Here's a brief update: Bullish sentiment has decreased, but it's still at 30. So, we should expect rallies to continue failing until it drops below 20, preferably below 15. However, certain stocks and sectors will exhibit divergence. We are already witnessing this in the uranium and coal sectors, for example.

Regarding sentiment, the only other exception would be if neutral readings surged to 55 or higher. At that point, we wouldn't be concerned about whether the sentiment is bullish or bearish; we would jump in and start buying.

[MarkD]

Thought I would post the current condition of the SPX with AVWAP.

https://ibb.co/ngDFCkZ