Alexandre Penna R.

I am a veteran in the oil industry, where capex allocation is critical. Project portfolio optimization, value of information, those are my fields of interest.

[Alexandre Penna R. @apennatam]

Bloomberg-The wars being waged by the US, Israel and Russia aren’t helping matters. They helped drive a fresh jump in oil prices. Strategists see scope for US yields to climb further as heavy govt borrowing and the risk of additional central-bank tightening continue to percolate

[Alexandre Penna R. @apennatam]

Authers-One more consequence of higher Treasury yields: the strengthening dollar, which often inflicts pain on holders of EM local currency debt. But trade fragmentation points to stronger ex-US equity returns in the next five years, notably for emerging markets.

[Alexandre Penna R. @apennatam]

Authers-The market’s narrowing during the AI boom looks very much like the rally once the Yahoo IPO set off the dot-com bubble. Two days like Monday’s action, when the S&P 500 rallied at least 1% to within 1% of a new high/more new lows than highs: July 23, 1929, and Dec 21, 1999

[Alexandre Penna R. @apennatam]

Authers-In the longer run, the yen should continue its appreciation. But the path will not be smooth life-tough for Japanese officials. For the rest of the world, a sudden stop to cheap funding via the yen carry trade (borrowing in yen to park elsewhere) looks less of a risk

[Alexandre Penna R. @apennatam]

Authers-How might this unravel if the AI buildout goes south? Pimco’s Lotfi Karoui argues that for hyperscaler creditors, the first-order effect is disappointing returns on their investments in AI — not great for their shareholders.

[Alexandre Penna R. @apennatam]

Authers-Growth in nominal GDP is a strong driver of 10-year yields-and it is growing about as fast as it ever has since the 1980s, once the extreme distortions caused by the pandemic shutdowns are excluded. So we had better assume that this is the start of a tightening cycle.

[Alexandre Penna R. @apennatam]

Authers-share prices are holding up better than in any episode when valuations declined on this scale. If yields lead to shares trading at a lower multiple of earnings, that’s something that can be lived with. But higher yields could mean profits don’t come through as forecast.

[Alexandre Penna R. @apennatam]

Authers-the key was what Warsh didn’t say: there was no suggestion that this was a one-off. As a result, the market priced in a lot of tightening. The calm reception so far shows investors’ acceptance that the world is more expensive. That calm can continue if bonds move orderly

[Alexandre Penna R. @apennatam]

Bloomberg-Forget chips and data centers. The road to AI billions also runs through drawer slides. The boom is minting fortunes in some of manufacturing’s least glamorous corners, from server rail kits to micro drill bits.

[Alexandre Penna R. @apennatam]

Authers-the 10-year yield ended the week at a three-year high, and a whisker away from returning to territory it last saw in 2007. What happens when and if it goes through that watershed could be crucial. These are perilous times. Even though August’s inflation data weren’t bad.

[Alexandre Penna R. @apennatam]

Authers-If any stock market is at risk from rising bond yields, it is the US- because a huge chunk of American companies’ value is tied up in future earnings. A 5% 10-year yield could hasten a decisive downturn for equities — or from an end to the rosy earnings assumptions.

[Alexandre Penna R. @apennatam]

Authers-Yen last week’s recovery came despite a strong US payroll report. This looks like a genuine important market signal. Japan strategy would be to speed up repatriation of assets. If that happens, the rest of the world will need to learn how to do without Japanese funding.

[Alexandre Penna R. @apennatam]

Authers-high Treasury yields are coinciding with a surge in index tracking emerging-market currencies. High real interest rates and stronger fiscal positions in parts of the developing world offer investors both income and a place to ride out the volatility shaking bond markets.

[Alexandre Penna R. @apennatam]

Authers-chances are that this state of affairs will persist for a long time. This is less a crisis than a return to normality after the weird conditions, and often desperate interventions, of the post-GFC era. Sudden, sharp rises, however, can cause a cascading meltdown.

[Alexandre Penna R. @apennatam]

@TonyVolpon o crash demográfico é a grande esperança contra o aquecimento global...

[Alexandre Penna R. @apennatam]

Bloomberg-Wall Str’s verdict is in: Bessent’s buyback proposal won’t remedy the growing problem faced by the gov when it comes to borrowing costs. “the ‘Bessent put’ is still going to fail to keep yields down from multi-decade highs over the longer term,” Singh/ Fundstrat Global

[Alexandre Penna R. @apennatam]

Authers-maneuvers like this will weaken the dollar further, and increase the pressure on a Fed whose independence... It remains hard to see what gets bond yields down other than a clear move to reduce the deficit. The more it hurts politically, the more seriously it will be taken

[Alexandre Penna R. @apennatam]

Authers-One key point about the bond selloff is that it’s not indiscriminate. The BofA survey finds fund managers are underweight bonds, but not some desperate dive for the exit. Bond markets appear to be running out of patience with problems long in the making in many places.

[Alexandre Penna R. @apennatam]

Authers-executives’ optimism as the percentage of fund managers expecting double-digit earnings growth over the next year. (but) As the election campaign comes into focus, there’s a risk that investors will catch up to the threat of a very fractious two years of politics ahead...

[Alexandre Penna R. @apennatam]

Authers-commodities like copper have provided a tailwind in Latin America, but that comes nowhere close to technology. South Korea and Taiwan, home to big chipmakers, are being treated as pure AI plays. Another positive driver is the weaker dollar.