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Open Interest Changes

PREMIUM

Prepper

2020 was COVID, and 2021 was the supply chain. 2022 was inflation, and 2023 was interest rates. Now, the biggest investing risk going into 2024 looks like it will be geopolitics. Traditional relationships and alliances are breaking down, and a more polarized world has given way to structural market risk. It can also be hard to plan for such wildcards, though broad hedging and defensive plays could play a key part in investing strategy for the new year.

Snapshot: One such risk is already on full display, with Iranian-backed Houthi rebels in Yemen conducting repeated drone and missile attacks on commercial vessels traversing the Red Sea. The Bab el-Mandeb Strait is a crucial shipping passage that facilitates a sixth of world trade and is important to global seaborne commodity shipments like crude oil. Insurance premiums have risen as a result, and have even prompted the world's biggest container shipping lines to avoid the Suez Canal by diverting their cargoes toward the circuitous route around Africa. Among them are Swiss-based MSC and French CMA CGM, as well as Danish A.P. Moller-Maersk (OTCPK:AMKBY), German Hapag-Lloyd (OTCPK:HPGLY) and Hong Kong-based OOCL (OTCPK:OROVY), whose stocks have climbed 8%-17% over the past week amid rising prices.

The Houthis had originally said they would target Israeli-linked ships to show solidarity with Hamas, but that has since extended to all ships en route to Israel, and the assaults have even continued against other ships regardless of their destination. Defense Secretary Lloyd Austin is in Israel on Monday to discuss the latest developments and will travel to Bahrain and Qatar this week to follow up on the talks. It comes as American troops in Iraq and Syria have been targeted by Iranian-backed proxies over 90 times since mid-October, and as the U.S. enters the coming year with its smallest military force since 1940 (active-duty troops will drop to 1,284,500).

What's on the table? American ships like the USS Carney and fellow destroyer USS Mason have been neutralizing threats in the Red Sea since the start of the Hamas-Israel war, but a larger force is now needed. The new plan appears to be an expansion of Combined Task Force 153 into a broader maritime alliance that will initially be called Operation Prosperity Guardian. The Pentagon is also deliberating whether to directly strike Houthi military targets in Yemen to protect maritime security, though until now there have been fears of potentially fueling a broader conflict against Iran and its proxies. Take the WSB survey.

Only ZEVs

Canada is moving ahead with its electrification plans, with new rules expected to be issued tomorrow requiring all new passenger cars sold in the country to be zero emissions by 2035. The regulations are aimed at shortening wait times for EVs and ensuring enough affordable zero-emission vehicles are available to meet the demand. Canada wants ZEVs to represent 20% of all new car sales in 2026, 60% in 2030 and 100% in 2035. Brian Kingston, CEO of the Canadian Vehicle Manufacturers' Association that represents Ford (F), Stellantis (STLA) and GM (GM), said stronger incentives are needed to make ZEVs more affordable, instead of a mandate on "what Canadians can and cannot buy." (11 comments)

No grail

Illumina (ILMNplans to divest its cancer detection unit after a Fifth Circuit Court of Appeals ruled that the FTC was correct in finding the $7.1B purchase of Grail was anticompetitive. The FTC had ordered Illumina to shed Grail in April, with the European Commission following suit in October. Illumina, which won't appeal the court's ruling, plans to divest Grail either through a sale or a capital markets transaction, with the goal of finalizing the terms by the end of Q2. Illumina has already received buyer interest for Grail, which it acquired in 2021, and SA analyst Main Street Investor believes the divestment could unlock significant shareholder value. (5 comments)

Soft landing

Economists may have what to celebrate as inflation is projected to near the Fed's 2% target next year without a recession or a surge in unemployment, according to the Congressional Budget Office. Inflation is expected to fall to 2.1% in 2024, reflecting softer labor markets and slower increases in rents, but will tick up to 2.2% in 2025. The CBO also expects real GDP growth to slow to 1.5% in 2024 amid a slowdown in consumption, investment, and exports. SA Investing Group Leader Lawrence Fuller said traders should be wary of the overly optimistic bullish sentiment even though a soft landing is near, while Mott Capital Management believes the Fed showed its cards too soon. (4 comments)

Today's Markets

In Asia, Japan -0.6%. Hong Kong -1%. China -0.4%. India -0.2%.
In Europe, at midday, London +0.6%. Paris -0.3%. Frankfurt -0.3%.
Futures at 7:00, Dow +0.1%. S&P +0.1%. Nasdaq flat. Crude +1% to $72.51. Gold flat at $2,036.50. Bitcoin -2% to $41,058.
Ten-year Treasury Yield -2 bps to 3.90%.

Today's Economic Calendar

10:00 Housing Market Index

Companies reporting earnings today »

What else is happening...

IPOs 2024: Watch for Fanatics, Reddit, Shein, and more.

Chuck E. Cheese exploring sale, may be worth over $1B.

Apple (AAPL) facing expansion of China iPhone ban.

Scandinavian investors join Tesla (TSLAlabor fight.

Elon Musk: Don't shun fossil fuels amid green transition.

KKR buys $7.2B RV loan portfolio from BMO Financial.

Fashion executives see upcoming uncertainty for the industry.

Nvidia (NVDA) stock outlook: What to expect next year.

Alex Rodriguez's SPAC Slam to merge with Lynk Global.

Redfin: U.S. housing market to shift in buyers’ favor in 2024.


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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