13# Signal 2 Noise

In today’s issue:

• Focusing on High Impact News

• Are Commodities Topping?

• China Cuts Interest Rates

• Private Credit

• Vision 2030 

S2N Updates

I am back to sharing the internal torment I am going through trying to get comfortable with the newsletter format and style.

I have decided that for now I will include all the tables making up the Performance Dashboard but will not include the 6 main charts in the Chart Gallery. I think the table packs more than enough vital information. The main charts might feel a bit repetitive, but I am also thinking that the Chart Gallery and Interesting sections may need to go. I am going to try to deal with all the areas of interest in the S2N Insights section.

I have been worried that I am presenting too much narrative based on my biased interpretation of the world. I do want to keep doing this, as I think a lot of the value in this newsletter will come from me throwing personal thoughts and ideas around, teasing out deeper understandings from my years of experience. However, there is an important thing missing, and I am so glad I have identified it. This doesn’t mean I can solve it right away, but I know what I need to do.

The whole idea of what I set out to do with Signal 2 Noise is to help identify high probability trade ideas but also to unpack the news as it is presented and analyse whether the signals or stuff making the economic news are in fact strong signals worthy of news.

Performance Review

There was a lot of decent price action on the markets yesterday, as can be witnessed with all the colours on the dashboard. The most noticeable for me was the massive move in Natural Gas: +9.30% that is big. Another big move was the -4.35% in NVIDIA one of the main faces of the AI boom. It reports its earnings today and will be one of the main news events of the day.

Economic News Today

New Signals

So much to say here but simply not ready yet.

S2N Insights

Are Commodities Topping?

I wrote yesterday that I thought commodities were maybe topping out. I realised that I had not fully integrated my superior quality data with the platform. The first chart I wish to use to help illustrate what might be the start of a new commodity downturn is the Bloomberg Commodity Index chart.

Another chart I have included, and I am delighted I now have access to daily data, is Iron Ore. Living in Australia, this asset has been one of our countries biggest blessings. They call Australia the lucky country. Australia has the worlds largest supply of iron ore and this resource was in major demand during China’s economic boom of the last few decades. The 2 richest people in Australia are iron ore miners.

I will keep on harping about this commodity, as I think it is an excellent barometer of the economic strength of the Chinese economy.

China Cuts Interest Rates

The five-year loan prime rate (LPR), which commercial banks use as a benchmark to adjust their mortgage rates, was lowered from 4.2 to 3.95%. This has been done in an attempt to jumpstart mortgages and the ailing property market. (Bloomberg).

Private Credit

I mentioned yesterday that the growth in private credit could be a concern. 24 hours later in the Australian papers it announces that 2 major pension funds are making major increases in their allocations to private credit. Seems like a space to watch.

Vision 2030

Not sure if any of you have heard of Saudi Arabia’s Vision 2030. I was reading the WSJ with my mouth wide open at the sheer scale and audacity of the Arabian Kingdom’s desire to transform the Middle East into the “new Europe.”  They call them gigaprojects costing between $40 and $100 billion a pop. In fact, the Kingdom’s sovereign wealth fund cash balances are at the lowest levels they have been since reporting, and the country is running a fiscal deficit. 

Oil prices below $80 are going to put a huge strain on this economy, something they have not really known in my lifetime.

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