I hope you are enjoying the holidays and looking forward to a better year next year.
Here’s another one of Charles Gave's excellent articles-the oil price is on the move thus starting to bear out his fear of a 1970s-type repeat.
Secondly, regarding Ethereum, have you been able to quantify any price target and if so, what technical data/events have you chosen to use?
This article by Tom Hancock and Enda Curran for Bloomberg may be of interest to subscribers. Here is a section:
One reason it hasn’t leaned on its balance sheet as much as global peers is the PBOC largely handed the task of increasing money supply and lowering interest-rates to state-owned banks. It cut bank reserve-requirements, meaning they had more cash to dole out in loans.
With the economy growing again, policy makers have signaled they want a more sustainable pace of credit expansion. By contrast, the Fed, European Central Bank and Bank of Japan have all announced plans to maintain and step-up stimulus into the next year.
“Advanced economy central banks will try to use negative real interest rates and inflation to erode the real value of their sovereign debt,” said Andrew Sheng, chief adviser to China’s Banking and Insurance Regulatory Commission. “This is why real money flows will go to the economies that show growth, higher productivity” and steady monetary and exchange rate policy, he said.
The difference in yield between Chinese government bonds and U.S. Treasuries is already near record levels, with many market players expecting the gap to widen further next year
This article by Nicholas Comfort may be of interest to subscribers. Here is a section:
Andrea Enria, head of the ECB’s supervisory arm, said in a Bloomberg Television interview that there’s limited visibility on asset quality and that the bank will revisit its decision in September. He also called for moderation on banks’ variable pay.
The cap makes the ECB one of the more hawkish banking watchdogs in Europe. The Bank of England said last week that it will allow lenders to make payouts that don’t exceed 0.2% their risk-weighted assets, or 25% of cumulative quarterly profits over 2019 and 2020 after deducting shareholder distributions.
Thanks, Eoin, for your considered response. The point I was trying to get at though is that looking at a stock price chart only can hide all manner of sins. If the share count has doubled, all else equal, the price per share should only be worth half what it was previously. Having said that, I wouldn’t be in the least bit surprised if the Robinhood crowd bid up these names as they search for the last remaining recovery names without due consideration for all of the facts. Though in the short-term markets can be a voting machine, in the long term they are a weighing machine, and ultimately these investors will be found out.
On the weekend review you highlighted Norwegian Cruiselines as one of the deeply impacted stocks along with the likes of Rolls Royce. At what point though should you be considering what has happened balance sheet wise? In their case, at the end of 2019 they had 214mn shares outstanding. At the end of Sept Q that had risen to 271mn (+27%). They have also just issued another 40mn shares to 311mn (+45% on 2019). In addition, they have issued $1.4bn in additional debt as well as convertible notes that can be exchanged for equity at prices lower than today's price. If those notes are converted, another 120mn shares will be issued by 2022, taking the share count to a 431mn, double the 2019 share count. The enterprise value right now is $17.1bn, compared to the Dec 19 enterprise value of $18.5bn. On this basis then, NCLH is within 10% of its pre Covid-high, and so surely, we can't look at the chart and look to the previous trading range for stock price potential. 10% above the current price is roughly $30, rather than the $50 price point the chart might otherwise indicate. The same applies to a host of these sorts of stocks such as Carnival, Royal Caribbean, American Airlines, etc etc.
With the growing expectation of rising inflation in 2021 what areas of the world markets would you choose to be positioned in if this proves to be the case? I note you only have a few trades on at present. Ae you likely to broaden these in the future?
This article from Bloomberg may be of interest to subscribers. Here is a section:
At its heart, the rotation is based on the idea that there’s a lot of money in the economy waiting to be spent on things besides video streaming and online shopping. The U.S. personal savings rate was 7.2% at the end of 2019. By April it had surged to 33.7%, and it was still 13.6% in October—almost double where it started the year. Deposits at U.S. commercial banks swelled to almost $16 trillion in November, up from $13.2 trillion at the end of last year. If consumers revert to their pre-pandemic ways, that could set off what Jim Paulsen, chief investment strategist for the Leuthold Group, has called “a growth bomb,” as companies gear up to replace lean inventories.
Fund managers with a value bias say there are still opportunities to take advantage of the change in investors’ tastes. Chris Davis of Davis Funds points to the banks Wells Fargo & Co. and Capital One Financial Corp., whose prices were hammered when lockdowns began in March and still haven’t fully recovered. Davis thinks investors have overlooked how banking regulations enacted after the global financial crisis have made these lenders better able to handle recessions. “When you look at their valuations, the amount of cash they produce, the capital ratios that they have, the reserves they’ve been able to put up—they really have this characteristic of resilience and durability, and yet are priced at this sort of shockingly low level,” he says.
I have been a subscriber for just over 30 years, and in that time, I can't recall many times when a clear and concise analysis of economic and political conditions was as important as it is today. You are doing a wonderful job at keeping the collective informed, allowing us to see a broader picture than our individual biases might otherwise give us. Thanks so much!
And
Congratulations our last subscriber commentary was exceptional. You have done wonders for my confidence and ability to help my clients. Keep up the good work. Best wishes
What strikes me and many other observers is that Gold is down by 1.5% to 1785 cash (just before Nov. contract expiry date…) but GDX and GDXJ are UP by 0.4% and 0.9%!
Silver is DOWN by 3% (just before Nov. contract expiry date…) while Silver miners SIL is also slightly UP!
As miners normally lead for me the dichotomy between metals and miners is probably due to the bullion banks trying to push down prices for the (RECORD!) deliverable contracts (they are short Gold by about USD 35bn!) and will allow metal prices to rise next week
If so, then this then be in tune with your Nov. 26 turn-around/bottom +- 1-2 trading days for the 10 and 20 day cycles.Thinking about undoing my residual hedge via JDST before markets close early today….
What is your view on the above?
I much wonder if your bottom-fishing orders for PM’s were triggered today – but I suppose you want to get in at prices closer to 1700 for gold…
