Morning Reads


Todays Open Interest Change




"If you owe the bank $100, that's your problem. If you owe the bank $100M, that's the bank's problem." It's a famous quote attributed to industrialist John Paul Getty, but has been applied to many scenarios and across many sectors. China is the latest to find itself in a similar predicament after lending nearly a trillion dollars to developing countries under the Belt and Road Initiative, which President Xi Jinping dubbed the "project of the century" when unveiling his signature foreign policy in 2013.

Bigger picture: Many have described the lending effort that funds infrastructure projects as a "debt trap," designed to create political goodwill and cement Chinese influence on the world stage. China, in turn, refers to it as a public good, or an equivalent of the Marshall Plan, with 151 countries so far listed as having signed up to the BRI. The initiative was even incorporated into the Constitution of China in 2018, but a series of crises are threatening to push the project off the road, including the aftermath of the pandemic, inflation challenges, slowing global growth, and major loan repayments that are coming in a high-interest rate environment.

In fact, as of last year, 60% of China's overseas lending portfolio supported debtors in distress, up from just 5% a decade earlier. Nations like Zambia and Ghana, as well as Ethiopia and Kenya, are all trying to find their way out of a default, while Sri Lanka and Pakistan have similar debt problems with Beijing becoming their largest bilateral creditor. In the past, emergency rescue lending and writedowns were explored, but China is taking a heavier hand this time around, complicating sovereign debt restructurings and the situation in emerging markets.

Go deeper: Debt risks and debt crises have the attention of G20 finance ministers who are meeting in Washington, and were on display earlier this week during the "Global Sovereign Debt Roundtable" that was co-chaired by the heads of the IMF and World Bank. China softened its stance following the gatherings, saying it was willing to drop a demand that multilateral lenders share some of the pain and would work through the G20 Common Framework for Debt Treatments, but only time will tell how things will play out. "The response of China will reveal much about its position in the 21st century international financial system," SA contributor The Angry Bear declared in an article entitled, China And The Debt Crisis.

Bank earnings

JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC) will kick off the Q1 earnings season this morning, giving investors a look into the sector for the first time since the banking crisis last month. Note that the crisis mainly impacted U.S. regional banks, like SVB (OTC:SIVBQ) and Signature Bank (OTC:SBNY), and not too-big-too-fail players that are due to report today (with the exception of Credit Suisse (CS) which was ailing for years). The full effects of the crisis may not show up until the next earnings quarter, though investors will be paying attention to any comments on the macro and consumer landscape, as well as the likelihood of a recession (especially during the conference call of JPMorgan CEO Jamie Dimon). SA Investing Groups Leader JR Research calls out Citi ahead of the earnings show, calling it the cheapest among its leading G-SIB banking peers in the U.S. (28 comments)

Very shiny

Gold is now within $10 of its all-time high as a number of drivers propel the precious metal and its peers toward new records. Catalysts include economic worries and fears about a recession, as well as lower U.S. Treasury yields and a weaker dollar. Shares of precious metals miners have ridden gold's advance, with YTD gainers including Agnico Eagle Mines (AEM) +11%, AngloGold Ashanti (AU) +39%, Barrick Gold (GOLD) +13%, Franco-Nevada (FNV) +14%, Gold Fields (GFI) +45%, Harmony Gold (HMY) +34% and Kinross Gold (KGC) +25%. "There has been a sudden, unexpected shift in investor sentiment to the broad belief gold is going higher. This is always cause for caution," Michael James McDonald writes in a new SA analysis that explores options activity. (35 comments)

Cue the controversy

Cancel culture is meeting the stock market again as many debate the direction of Anheuser-Busch (BUD) shares following Bud Light's marketing deal with transgender social media influencer Dylan Mulvaney. While analysts have expressed various perspectives, like stinging suppliers to the "backlash is overdone," the stock is only down about 3% since the Instagram video first surfaced on April 1. A week earlier, VP of Bud Light Alissa Heinerscheid commented that there would be no future for the "declining brand" if it didn't evolve to attract younger drinkers by shifting the tone to inclusivity. "Blowing Up Bud Light Cans Doesn't Change The Company's Bottom Line," writes SA contributor Pinxter Analytics, though Investing Groups author Jonathan Weber calls it a "Risky And Failed Marketing Campaign." (695 comments)

Today's Markets

In Asia, Japan +1.2%. Hong Kong +0.5%. China +0.6%. India closed.
In Europe, at midday, London +0.3%. Paris +0.3%. Frankfurt +0.4%.
Futures at 6:30, Dow -0.3%. S&P -0.2%. Nasdaq -0.3%. Crude +0.3% to $82.40. Gold -0.2% to $2051.40. Bitcoin +2% to $30,847.
Ten-year Treasury Yield -2 bps to 3.43%

Today's Economic Calendar

8:30 Retail Sales
8:30 Import/Export Prices
8:45 Fed's Waller Speech
9:15 Industrial Production
10:00 Business Inventories
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today »

What else is happening...

Cooler-than-expected Producer Price Index follows CPI data.

Boeing (BA) skids on warning of 737 delays from supplier issue.

Delta Air Lines (DAL) profit figure fails to meet analyst expectations.

French protesters storm HQ of LVMH (OTCPK:LVMHF), with stock at record high.

Big discount: Express (EXPRbuys Bonobos from Walmart (WMT).

Apple Glasses (AAPL) not likely to be seen for several more years.

Gene editing stocks rally as Wall Street turns bullish.

Biden still no friend of fossil fuels despite Alaska OK - Conoco (COP).

BP (BP) starts oil production at new Gulf of Mexico offshore platform.

Amazon (AMZN) boosted by Jassy letter and new AWS tools aimed at AI.

Bitcoin (BTC-USD) surges 81% YTD: Is the rally for real or just FOMO?

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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