Morning Reads









Inflation nation: The Consumer Price Index peaked at an annual clip of 9.1%, marking the fastest pace of inflation in four decades. At the time, the central bank said it didn't want to risk more entrenched expectations, and continued to hike rates by 75 basis points (there was even talk of a 100 bps increase at one point). "These rate hikes have been large and they have come quickly, and it's likely that their full effect has not been felt by the economy," Fed Chair Jay Powell declared at the monthly FOMC meeting.

Oil for security: With an energy crisis playing out at home, President Biden traveled to Saudi Arabia to reassert America's presence in the Middle East. The trip was a big policy U-turn for Biden, who has previously labeled the Kingdom a "pariah" and refused to talk with Crown Prince Mohammed bin Salman in the aftermath of the killing of U.S.-based columnist Jamal Khashoggi. There was an apparent understanding that the summit and a notable fist bump would lead to additional Saudi crude production, but Riyadh later scrapped a paltry boost to OPEC+ production, and even deepened its cuts by a whopping 2M barrels per day, or about 2% of global supply.

The housing story: The overheated U.S. housing market started to cool down in what some in the industry called a real estate shakeout. Sales of previously owned homes fell 5.4% M/M in June to 5.12M units, according to the National Association of Realtors, and were 14.2% lower when compared to the same month a year ago. At those levels, sales fell to their slowest pace since June 2020, when buying activity dropped briefly at the start of coronavirus pandemic.

Revolving door: Things got crazy over in the U.K. as Boris Johnson stepped down from his role as U.K. prime minister. It followed increasing pressure to resign after a series of scandals, including "Partygate" and allegations of misleading the public over the appointment of former deputy chief whip Chris Pincher. A disastrous mini-budget from Liz Truss sent the pound to near parity with the U.S. dollar, and she was only in office for 44 days before Rishi Sunak took the reins on 10 Downing Street.


Inflation Reduction Act: After more than 15 hours of amendments and a "vote-a-rama" session that stretched over an entire weekend, the U.S. Senate narrowly passed the Inflation Reduction Act. The measure - which aimed to cut government deficits and consumer medical bills while boosting climate spending - gave President Biden a legislative achievement ahead of midterm elections, and another win for his economic agenda, after Congress pulled through on the Chips for America Act. The bill somewhat embodied earlier incarnations of the Build Back Better plan, albeit with a price tag of around $430B (in place of $3.5T, and a revised version of $2.2T).

The Office: While Apple (AAPL) attempted to get its employees back to the office, other companies gave up on their brick-and-mortar institutions. Lyft (LYFT) said it would rent out nearly half of its office spaces in New York City, Nashville, San Francisco and Seattle, as it doubled down on a "fully flexible" work policy. In fact, the average workplace occupancy rate in the top-10 U.S. metro areas hit 43.5% in July, down from over 95% before the pandemic began, according to Kastle Systems, which collects daily data on how many workers swipe into office buildings.

Dire straits: Taiwanese leader Tsai Ing-wen greeted U.S. House Speaker Nancy Pelosi at the presidential office in a high-stakes visit that enraged Beijing. Pelosi reaffirmed a pledge that the U.S. wouldn't abandon Taiwan, saying solidarity was more important than ever in a "world [that] faces a choice between autocracy and democracy." The two also discussed deepening economic cooperation and supply chain resilience, while the White House sought to distance itself from the visit and emphasized that the trip does not signal a change in its 'One China' policy. Beijing responded with live-fire military drills and sanctions on Taiwan.

Revving the QT engine: Fallout from the economic symposium in Jackson Hole dented a summer rally for the markets, while investors had their eyes on more drama stemming from the central bank. The Federal Reserve began to raise the throttle of its quantitative tightening program by picking up the pace at which it unwinds its balance sheet. The move was a stark reversal of pandemic-era bond buying, which saw the central bank nearly double its balance sheet to nearly $9T from $4.2T over the past two years.


Energy shocks: European energy ministers convened in Brussels as an energy crisis deepened across the bloc ahead of the winter. A toolbox of measures was created that included government support, price caps and windfall revenues, while rationing and trading suspensions were also discussed. Elsewhere, EU member states rushed to complete an eighth round of sanctions as Vladimir Putin announced a "partial mobilization" that conscripted as many as 300,000 troops, while Russia stopped pumping gas through Nord Stream 1, before the pipeline system reported extensive damage that authorities classified as an act of sabotage.

The Merge: The crypto community celebrated a big milestone for the Ethereum blockchain, which transitioned from the proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) model. The move aimed to reduce the power needed to secure Ethereum by around 99.95%, easing the concerns of those worried about the environmental impacts of crypto (Ethereum currently emits as much carbon as Singapore and its total energy consumption is similar to the Netherlands). ETH (ETH-USD) issuance also decreased (a.k.a. Triple Halving), while industry players further decentralized the network by securing Ethereum at home, taking some control away from the institutions and sophisticated miners.

'Working on the Railroad': Railway unions finally came to a tentative labor agreement that would avert a damaging strike, which was set to cost the U.S. economy an estimated $2B per day. The Association of American Railroads said the deal would give rail employees a 24% wage increase during the five-year period from 2020 through 2024, as well as an immediate payout that averages around $11,000, but the contract was later rejected by staff due to sick-leave policies. Congress acted quickly to bind rail companies and their employees to the previous settlement to "avoid the impending, devastating economic consequences for workers, families, and communities across the country."

Downsizing: The slowdown in tech went on full display after Facebook parent Meta Platforms (METAannounced plans to reduce headcount for the first time ever. The social network went on to shed 11,000 jobs, or about 13% of its staff, amid an advertising slump that was exacerbated by Apple's (AAPL) iOS privacy changes. Meta is also waiting for its big investments in virtual reality (Oculus), the metaverse (Horizon Worlds) and short-form video (Reels) to bear fruit, as growth peaks across Facebook, Instagram and WhatsApp. With macroeconomic headwinds present elsewhere in the sector, "tech layoffs" materialized into one of the big themes of 2022.


Brace for impact: The cleanup from Hurricane Ian wasn't pretty, and it was the worst of what became one of the costliest Atlantic hurricane seasons on record. Floridians were urged to evacuate before Ian crashed into Cayo Costa as a Category 4 hurricane, with storm surges reaching as high as 18 feet in some coastal areas and wind speeds of up to 155 mph. It ultimately led to 157 fatalities, 146 of which were in Florida, as well as extensive infrastructure and property losses, with insured damages valued at $50B-$65B.

'Bird is freed': A new era at Twitter (TWTR) translated into new leadership and Elon Musk was quick to update his platform bio to "Chief Twit." The billionaire finally completed his $44B acquisition of the social network, prompting an executive exodus and departure of rank and file employees. Musk has since pledged to step down from the top role, is attempting to move towards subscriptions to make money, and triggered continuous drama from his abrupt policy changes. On his first day after the takeover, Musk showed up by carrying a kitchen sink into Twitter's San Francisco headquarters, joking "let that sink in."

Lighting up: While they couldn't sustain the gains, traders bid up major cannabis companies following comments made by President Biden in regards to a review of marijuana as a Schedule I substance. 38 U.S. states have already legalized pot either medically or recreationally, but it is still illegal in some states and at the federal level. Biden also pardoned 6,500 individuals convicted of "simple marijuana possession," noting that it doesn't make sense that pot is classified at the same level as heroin. 1 in 6 Americans are currently smoking marijuana, according to a Gallup poll from the summer, which highlights how the times are rapidly changing.

Grain deal: Russia agreed to return to a Turkish and U.N. brokered agreement that allowed the shipment of millions of tons of Ukrainian grain through the Black Sea. It had previously pulled out of the deal following an alleged Ukrainian drone attack in Crimea, but said "written assurances" from Kyiv guaranteed the humanitarian maritime corridor would not be used for military purposes. Wheat and corn futures, as well as other commodities, went on a wild ride in response to the developments, with Ukraine being traditionally referred to as the "Breadbasket of Europe."


#Midterms: No red wave materialized in a key U.S. midterm election that saw Democrats eventually score a 51-49 seat majority in the Senate (following Raphael Warnock's victory in Georgia). Congressional gridlock still lies ahead, with the GOP taking control of the House of Representatives. A clear majority for Senate Democrats could still give the party more flexibility on passing legislation by lessening the influence of centrist Sens. Joe Manchin and Kyrsten Sinema, while Democrats will have outright control of Senate committees and won't be bound to a power-sharing agreement with the GOP.

Crypto collapse: One of the biggest stories of the month (and perhaps the year) was the meltdown of FTX International, or what some in the market called a "Lehman Brothers" moment for the crypto industry. Once valued at $32B and the third-largest crypto exchange by trading volume, FTX froze withdrawals amid an $8B shortfall following a complete failure of corporate controls that shook the unregulated crypto industry. It's a moment of irony for the firm led by Sam Bankman-Fried, which itself served as a white knight this past summer to rescue several crypto players including BlockFi, Voyager Digital and Celsius. SBF is now awaiting trial in U.S. after being extradited from the Bahamas.

NATO membership: At a two-day summit in the Romanian capital of Bucharest, the North Atlantic Treaty Organization doubled down on a vow to make Ukraine a member of the military alliance. It was 14 years ago (in the same city) that foreign ministers first pledged that Kyiv would eventually become a constituent, and they still "firmly stand behind our commitment." Russian missile and drone attacks have continued to target civilian infrastructure across the country, with strikes that have heavily damaged Ukraine's power, water and energy infrastructure.

Zero-COVID: Three years after the first COVID-19 case was reported in Wuhan, China began letting up on its strict coronavirus stance as discontent spread across the country. Policies changed rapidly within weeks, with targeted lockdowns, testing, quarantine requirements and travel restrictions all being tossed out the window by the government. With emergency rooms and hospitals overrun, economists are trying to assess how the rapid easing will impact the world's second-largest economy, while the globe worries about the virus' untracked spread and possible new variants.


Meet C919: The Commercial Aircraft Corporation of China, better known as COMAC, delivered its first domestically-developed passenger jet to launch customer China Eastern Airlines (CEA). The C919, similar to the Airbus (OTCPK:EADSY) A320 and Boeing (BA) 737 narrow-body jet families, brings China a step closer toward its ambitious goal of becoming a global civil aerospace player. The plane, which underwent 14 years of development, is expected to make its maiden commercial flight in the spring, with a trip between Shanghai and the capital Beijing.

Cashing in on chips: Taiwan Semiconductor Manufacturing (TSM) made history with one of the largest foreign investments in the United States. The company announced plans for a second chip plant in Arizona (increasing its investment in the state to $40B), which would deliver enough chips to meet U.S. annual demand of 600K wafers per year. "It's the foundation of our personal electronics, and also the future of quantum computing and AI," said Ronnie Chatterji, White House Coordinator for CHIPS Implementation at the National Economic Council. "That's the definition of supply chain resilience. We won't have to rely on anyone else to make the chips we need."

Fusion revolution: The U.S. Department of Energy revealed a major scientific breakthrough, known as a net energy gain (or target gain), that could shake up how we power our world. The major milestone was achieved at the Lawrence Livermore Laboratory in California, where scientists used the world's largest laser to produce an effect known as magnetic confinement fusion. A tiny amount of hydrogen plasma, held in place by powerful magnets, was heated to extreme temperatures - resulting in the fusing of atomic nuclei and 20% more energy than was used in the lasers.

Bitter cold: Travel was upended from coast to coast over the Christmas holiday weekend, as snow, wind and subfreezing temperatures enveloped much of the country. That derailed the plans for many a flyer, as well as the operations of airlines that saw planes freeze overnight and airports run out of space for de-icing. No one appeared to be hit as hard as Southwest Airlines (LUV), whose scheduling systems went down for nearly a week as travelers complained of unanswered calls to customer service to rebook flights and retrieve baggage (it also sparked an investigation by the U.S. Department of Transportation).

Today's Markets

In Asia, Japan closed. Hong Kong +0.2%. China +0.5%. India -0.5%.
In Europe, at midday, London -0.5%. Paris -0.7%. Frankfurt -0.8%.
Futures at 6:30, Dow -0.3%. S&P -0.3%. Nasdaq -0.4%. Crude -0.2% to $78.25. Gold -0.1% to $1824.50. Bitcoin -0.6% to $16,502.
Ten-year Treasury Yield +2 bps to 3.85%

Today's Economic Calendar

9:45 Chicago PMI
1:00 PM Baker-Hughes Rig Count
3:00 PM Farm Prices

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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