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Markets finally dip as shutdown risk looms. Lithium on the brain...
Podcast 25 minutes to read
Summary: Today a look at the US equity market finally suffering a down day, perhaps in part as government shutdown risks are growing ahead of the September 30 deadline. We note increasing signs of a harder US attitude against Russia from the Trump administration, break down the latest disappointing news from Germany's economic data, what's going on in macro and FX and how one US lithium company saw as much as a 75% surge after hours after the Trump administration expressed interest in taking partial ownership. This and much more in today's pod, which is hosted by Saxo Global Head of Macro Strategy John J. Hardy.
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Today’s Links
Canada’s housing market bubble hangover is a gathering storm and a warning - an old Fed studies showed how damaging the after effects of real estate bubbles can be - just ask Japan post-1989 and China after its own real estate bubble unwind. The US was the most aggressive about blasting its way out of the last housing bubble, but that in part further aggravated inequality in the US. Mark Spitznagel - Nassim Taleb acolyte and gray- and black-swan insurance seller extraordinaire, is out with a dire warning about the state of the US equity market, even as he believes the bubble can further inflate before an ugly unwind. Here is an free article from Yahoo that also has the link to a WSJ article on his latest musings. MP Materials says that its deal with the US government to produce rare earth magnets is not easily replicable. But given their spectacular success, I bet there will be a lot of people trying! Lithium Americas (LAC) is a Canadian company, also with a US listing, that hoped to enjoy the strong lithium prices that soared on anticipation of the coming demand for EV batteries. Alas, since late 2022, lithium prices have suffered steep setbacks, falling almost 90% by the middle of this year before recovering somewhat. The company is now chiefly deploying its capital at the US’ largest lithium resource at Thacker Pass, Nevada after a large loan from the US government to dial up operations. Apparently, the Trump administration is now interested in taking some direct ownership in the Thacker Pass resource after encouraging GM to get involved with Lithium Americas as well. It’s clear that Lithium Americas will never be able to compete head-to-head on price with Chinese producers that don’t prioritize profits, but will it have to if lithium production is a national security issue for the US? Remember the MP Materials (MP) deal with the US Department of Defense. The only current active lithium producer in the US, Albermarle (ALB), also saw its shares up 5% overnight on this story. Whether LAC shares will prove a success from here is an open question, but it is clear that the US will prioritize secure friend-shored or even domestic-shored supply chains for lithium.Chart of the Day - Lithium Americas (LAC)
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