market leverage, inflation, and trade notes ?3

12:24 14-Dec-21

Market leverage moderated in November, but it is still far higher than at any point before the July spike where I began sounding the alarm.  Of more interest to most this week will be this morning's PPI numbers.  The headline Producer Price Index rose 9.6% YoY, which is the largest advance since its inception over a decade ago.  A lot of that is energy, but even excluding that, food, and trade services, the 0.8% sequential increase was the largest since July.  Coincidence or not, virtually everyone paying attention now has to conclude the the Fed will accelerate its taper and rate hike schedules.

The one excuse it might have is Omicron, and that has been used to justify sagging energy prices.  My bad on American natural gas, which didn't stabilize at all and is back down to $3.75.  I can understand the oil drop due to reduced transportation.  However, countries and thus the companies that serve them like New Fortress and hopefully Golar need to think much longer term.  Thus, I'll continue to pound the table on NFE shares at a 1-year low in below $23.  I acknowledge that developing economies may be hit hard by rising rates and that renewables are the rage, as shown by Shell's latest purchase.  Even so, I see Intel recognizing that it has to build in Malaysia if it wants to do so economically.  I also see California moving to cut rooftop solar payments and think suspect current NFE pricing has more to do with the tax gain harvesting I referenced yesterday along with the evidence that Brazil is edging forward.

I'm also noticing a spike in rebate rates across a broad selection of equities, possibly signaling further volatility.  XEBEF is at 10.5% and I continue to like its long-term prospects.  It's not just GRoDTs, though... ALTM is at 2.3% and even high liquidity stocks like HIMX and TU have uncharacteristically exceeded 1%.  Yet other high volatility stocks which had run up and fallen back, like AMSC & EBIX are NOT displaying similar real-time borrowing figures.  Both fit the tax selling profile and deserve some valuation love at this point.  It's also worth reiterating that the safest beneficiaries of volatility and rate movement remain VIRT and BGCP, which issued a press release this morning documenting further progress with its Capitalab project.  More tomorrow.