MM 19 November 2020

 Quotes

Commoditisation

Which trader are you?

What's your time horizon?

Markets & Macro news

Covid lock downs starting to impact European economic growth

In the US, lock downs are being discussed in some states and Costco stores are running out of … toilet paper

Governments took on USD 15tn more debt in the first 9 months according to the IMF. Gross debt topped USD 272tn in Q3 according to the IMF

No wonder therefore that key central banks' balance sheets have ballooned by USD 10tn to USD23tn

The money has gone to real estate mostly. According to HSBC, the total "value" of worldwide real estate is now USD 228tn. When you add total equity markets' capitalisation of USD 92tn and USD 10tn of gold asset value and some other stuff, it gives a grand total of USD 600tn of gross monetary value invested. This compares to world GDP of less than USD 90tn or P/sales of 6.7x. Compare this to the ratio of home prices to median family income and you have an interesting illustration of the asset bubble at work in the world of finance. Question: who is gonna have to give?

Why does this matter? Because the higher the price the lower the forward looking returns.

But also because -5% of USD 600tn is USD 30tn and because of the gross misallocation of capital into mostly unproductive, often illiquid and low yielding fixed income type of securities (mostly debt and real estate). The solution (bar a total collapse of asset prices and society) is a systematic debasement of money and a voluntarist political push to boost nominal income through inflation. But it is gonna take a lot more efforts. 

  And a proper debasement of the US dollar to inflate real assets and commodity prices

This is how you do it

So what has been the best asset class to own in real term over time?

In the short term however, the S&P is testing upper band of channel for third time

And 89% of stocks are back above their 200d MAV with a Demark count of 13, which suggests time to take some profits off the table

Small caps (Russell 2000) catching up fast, but with RSI touching 73 (overbought territory), it could be too fast.

Themes, Sectors & Corporate news

A bottoming out process is under way in the energy sector

But beware that inventories may rise temporarily before the end of the bear can be called

Not surprising perhaps as road use in Europe is falling again according to Atlantia

Gold junior miners feeling the brunt of consolidation move. Soon about to test important support levels.

But perhaps, this time the money is going elsewhere as Bitcoin closing in on all time high. Interesting to note that public interest in the matter is nothing compared to the last bubble

Generation Z is making itself felt

   

Otherwise, transport giant Maersk is getting more optimistic

Just as Food retailers see no return to new normal before long and building (or buying) their online grocery delivery capacities as forecasts predict 20% of food will be delivered online in 5-10 years

During Covid, pets and skincare have been big winners, consolidating what could be seen as major secular trends. New generations prefer pets to babies: long pet food, short baby food or long skincare, short fragrance worked.