WM 8 April 2022
Quotes
“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
The scientific view of time vs the the philosophical/experience-based view of time
Lessons & Thoughts
Thaleb
Stanley Druckenmiller
Liquidity is the expansion and contraction of money, specifically credit. It’s the biggest variable that drives demand in an economy. It’s something our team at Macro Ops follows closely.
Jeff Bezos
Ray Dalio
Technical patterns
The end of globalisation
Macro news
Money
Investments
Growth: recessionary vibes
China slowdown follows Japan, Korea and Taiwan's path
ISM roll over = slow down
Stock markets collapse six months before recession
Inflation
Tight labour
Earnings catch up
Demographics
FX
Precious metals
Crypto bull
Do you notice the difference between the crypto and the equity bull?
Bitcoin facing resistance
Biggest bubble in history?
Some say no based on "realised market cap"
Fixed income
Quantitative tightening
How much more can it take it?
Worst bond pull back in history?
Bonds are more volatile (risky) than equities...
Inversions
Corporate bonds in demand
High yield crashing?
Pension funds like rising rates
Real estate: bubble to burst
Only glimmer of hope = more demand than supply
Affordability never been so bad since 2007
Never been so expensive to own since worst time of housing bubble
High cost of capital, not seen since Great financial crisis
Equities
Inverted yield curve spells trouble
Head & Shoulder
Seen it before
90d mav turning just as stocks down = bearish
No breadth
Yet still majority of investors long
We know what happens when stocks contemplate recessions
Some hope for a repeat of 2020, but the Fed is not there to rescue the market anymore
Euphoria meter
Stocks still at elevated valuations
US
Traditional seasonal pattern suggests, after April things could turn nasty
Volatility
Volatility to bounce
High vol and high margin debt do not mix well
LT view
- rising cost of capital after 40 years of falling cost of capital
- rising labour costs/energy costs after 40 years of falling real labour costs and energy costs (globalisation)
- US fiat dollar system now overextended and put in question by rise of China
- technological creative destruction
Meanwhile
Risks: liquidity, concentration + correlation, leverage and quality
Commodities
Energy transition
Food
Lithium
I used to run a hedge fund. I remember vividly the day we invested in lithium, a few days after we heard that Tesla planned to invest in its first GW factory. This was in July 2015. The cost of the factory was USD 5bn. It was a big number at the time and meant Tesla was planning to manufacture 500k cars per annum. Since you need 8kg of lithium to make one car, we could see demand for or 4m tonne of lithium! At the time the global production of lithium was 30,800 tonnes equivalent to 164,000 tonnes of lithium car equivalent. So 25x more than supply ! Of course, it took a few years for the Tesla to raise the money and get the factory off the ground, such that the trade had a false start and saw a sharp correction between 2018-20. Concentration of deposits in Bolivia, Chile and Argentina + Australia. So gold rush was about to start.
Rare earths
Lumber
Other alternative: art
Themes, sectors & corporate news
Semi con
Cyclicals vs defensives
Another bearish signal: utilities outperform
Utilities vs banks
When banks stop liking rising rates, trouble is around the corner
GIEC sends alarm bell on climate change
Water
Transport under pressure
One sector that seems like a big short
And yet
Don't tell, show
Venture capitalists
Along with Tiffany, Signet is the king of engagement/wedding rings
Smoking returns lately by tobacco
Dividend yields from tobacco doing well
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