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Red October

Well folks, despite the large material risk-off catalyst that hit the market yesterday in the form of OPEC’s 2M barrel/day cut to production, the S&P still managed to run 1% by close. We have more on that below as well as recent developments on Russian Nuclear subs having been deployed to unknown locations. Read on for your daily dose of market inspiration as 2022 continues to mirror the 1970’s macro environment in more ways than one with rampant inflation, a gas crisis and the west vs. the east!


Markets in Review

While indices are largely down around 40 bps across the board in the premarket, let’s take a moment to hone into the commodity space this later half of the week as it’s our view that some recent shifts have materially impacted near term outlooks, and this will alter management guidance for Q4 during reporting. Starting with oil today, following OPEC’s announcement, the commodity has traded up around 4% but is finding resistance at its 50-day MA. With as much of a material change as this headed into a consumption-heavy season, especially on the transportation side of the demand equation, many are forecasting a return to the low 100s for the commodity. On the lower end of expectations, Goldman Sachs updated its price target to $110/barrel by the end of Q4.


Trade of the Day - Long: PBF Energy Inc. (PBF-NYSE) | Timeline: 2 days

PBF Energy Inc. (PBF), a company that engages in refining and supplying petroleum products around the world, is set to announce earnings this month - and as oil begins to edge higher due to supply cuts, energy stocks are bound to follow suit. But why PBF? The company is in a solid financial position coming into earnings season and is expected to report year-over-year earnings and revenue growth of +927.6% and +46.2%, respectively. (Source) Turning to the chart, 2022 has been a great year for PBF as they’ve run roughly 200% since January and has oscillated in the 30s for the last couple of quarters. As pictured in the chart, the stock is now positioned for another run into an above-price channel, indicated by the price breaking above its key resistance, and the MACD carrying substantial momentum through its equilibrium.


Zooming out...

OPEC+ Production Cut 2022 continues to mirror conditions of the 1970s this time, with a looming gas price crisis as everyone’s favourite cartel is back with yet another move that's likely to hinder the Western government’s efforts to cut inflation. At their meeting yesterday the group announced their 2M BPD production cut.

This presents a problem to the world, but more importantly the US administration as they head towards November. The cut was revealed as “hostile” in a memo sent between the White House and Treasury. At this point, this backs the US admin into a corner as the SPR reaches its lowest level in years. More than just prices at the pump, if this production cut continues into November the US inflation rate will likely spike once the SPR reserves are cut off, which should be sometime soon after the midterm elections. This could lead to even more tightening by the US Fed, while having further ramifications across the US, and global economy.

Bogey in the Wild

One of Russia's nuclear submarines, the K-329 Belgorod, has left its base in the Arctic and disappeared from there. The Belgorod is also the world’s largest nuclear submarine. This situation is dire as the Belgorod carries the Poseidon nuclear torpedo. This torpedo is a doomsday weapon which essentially acts as a slow-moving underwater ICBM that can devastate coastal cities and enemy vessel groups. Although it is slow, this torpedo is potentially unstoppable due to its unlimited range provided by the onboard nuclear reactor. Many have also theorized that this weapon could be detonated offshore, and used to create a nuclear tsunami.


Making headlines...

Telus will not sponsor Hockey Canada's men's programs this season

  • Telus Corp. says it will not be sponsoring Hockey Canada’s men's hockey programs for the 2022-23 season, including the upcoming World Juniors tournament. (Full Story)

Porsche Overtakes Parent Volkswagen as Europe’s Most Valuable Automaker

  • Porsche AG became Europe’s most valuable automaker a week after its initial public offering when its market capitalization overtook parent Volkswagen AG. (Full Story)

Nord Stream Hit by ‘Gross Sabotage,’ Sweden Says

  • The investigation into damage to the Nord Stream 1 and 2 gas pipelines “strengthened the suspicion of gross sabotage,” Sweden’s security service said. “Detonations” in the Swedish economic zone caused the pipelines’ extensive damage, it added. (Full Story)

World Currency Reserves Shrink by $1 Trillion in Record Drawdown

  • Global foreign-currency reserves are falling at the fastest pace on record, as central banks from India to the Czech Republic intervene to support their currencies. (Full Story)

Cathie Wood’s Dip-Buying Binge Mainly Focusing on Small Stocks

  • Cathie Wood’s latest dip-buying binge appears to be largely focused on smaller stocks, cementing her firm’s already hefty shareholdings in such companies. (Full Story)


Chart of the Day: Silver Price Change mimicking movement during the financial crisis


"Diplomats are useful only in fair weather. As soon as it rains, they drown in every drop." - Charles de Gaulle


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