ASX News LIVE | XJO Opens Lower as Markets Eye ‘Soft Landing’

Critical metals miner IGO [ASX:IGO] is down 7% on Monday after announcing a mammoth impairment charge of just under $1 billion.

Here’s another example of the risks associated with overpaying for acquisitions.

IGO is impairing the assets acquired from Western Areas in June last year, expecting to record a non-cash, pre-tax impairment expense of $880-980 million for FY23.

Why the large asset valuation haircut (a buzz cut at this scale)?

‘The impairment relates to the reassessment of the accounting value at Cosmos and Forrestania [assets acquired from Western Areas] to reflect higher capital and operating costs, challenges to the mine production schedule and delays in development at Cosmos. As a result, guidance provided on 31 October 2022 with respect to Cosmos has been withdrawn.’

$IGO is sliding on Monday after announcing a near-$1 billion non-cash impairment of assets acquired from Western Areas last year. #ASX $IGO.AX pic.twitter.com/EfKkpsHd3S

— Fat Tail Daily (@FatTailDaily) July 17, 2023

Welcome to a new week in markets. With earnings season kicking off, it’s set to be a busy one.

We mentioned last week that US inflation came in lower than expected, boosting confidence the US Fed is nearing the end of its rate hike cycle. The market is optimistic at the moment, with the CNN’s Fear and Greed Index still flashing Extreme Greed.

So it looks like the market is betting on the Fed to pull off a ‘soft landing’ and not splatter the economy on the tarmac.

One of the top stories on WSJ overnight, for instance, had the headline ‘Markets Appear Convinced the Fed Can Pull Off a Soft Landing’.

Catch the latest episode of What's Not Priced In!

> Aus has a new #RBA governor, but don't let it distract you
> Implications of US #inflation data
> Divergence b/w market fundamentals and stock valuations
> ASX #gold stocks
> Valuation approacheshttps://t.co/VVhKxyONLP

— Fat Tail Daily (@FatTailDaily) July 14, 2023

The recession bets are unwinding.

Earlier this morning, the AFR ran an illustrative story:

‘Traders love a good acronym. We’ve had TINA (There Is No Alternative) to explain the frenzied zero rate-fuelled bull run, and TARA (There Are Reasonable Alternatives) when higher rates usher in a bear market.

‘Now, as the current equity market run gathers pace, we’ve got the RINO – Recession In Name Only – rally.’

That said, as Greg and I discussed in the latest WNPI episode, even though the rate of inflation is slowing down, it won’t spell the quick end of high interest rates.

Maybe we can coin another acronym, HIRSH — High Interest Rates Still Hurt.