Comment of the Day
14th February 2023
Video commentary for February 14th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: bitcoin firms, inflation remains high, yields rise and stocks advance, oil rebounds from intraday lows, natural gas steadying, gold continues to unwind short-term overbought condition.
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Norfolk Southern (NYSE:NSC) Drops as EPA Asks It to Pay for Ohio Cleanup
This article from Bloomberg may be of interest to subscribers. Here is a section:
Norfolk Southern Corp. fell again as the railroad faced growing fallout from a train derailment that spilled chemicals in Ohio early this month.
The US Environmental Protection Agency notified the company of its “potential liability” and encouraged Norfolk Southern to reimburse the agency for its costs related to the crash. The EPA urged a quick response in its Feb. 10 letter.
The railroad said it received the EPA’s request and “will continue to perform or finance environmental monitoring and remediation,” according to an emailed statement. Norfolk Southern’s hazardous materials team was at the scene within an hour of the accident and continues to work with authorities, the company said in the statement.
The 150-car train derailed at 8:55 p.m. Eastern time on Feb. 3. It was hauling about 20 railcars with chemicals, including vinyl chloride, ethylhexyl acrylate and isobutylene, according to the EPA.
Those chemicals were released into the air, surface soils and surface waters near East Palestine, Ohio.
Norfolk Southern slid 1.2% Monday in New York, the fourth decline in six trading days since the spill. The shares are down 2.7% this year, while the S&P 500 Index is up 7.8%
Eoin Treacy's view
The spill and burn off of butyl acrylate into the Ohio river, which provides drinking water for millions of people, has understandably put consumers on edge. There will certainly be class action lawsuits if there is a hint the spill has led to health issues, particularly following the evacuation from a wide area around the spill.
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Sentimental Journey
Thanks to Iain Little for this edition of his Global Thematic Investors’ Diary. Here is a section:
Where next? The best comment, as it also applies to us, comes from one of our managers, Terry Smith: “Our companies should demonstrate a relatively resilient fundamental performance in such circumstances, and the only type of market which ends in a recession is a bear market.”
We are reminded by another market veteran we’ve followed for 40 years, Ed Yardeni, that the FAANGS, the mega tech US stocks which led the 2014 to 2021 bull market, still inflate the PER market rating. Without the FAANGS, the forward market multiple is only 16.7x, making it barely 2 points higher than the long-term average. Bearish commentators claim that earnings are about to take a hit, raising the PER, and rate rises are still in store. (Remember that 2 main factors influence share prices: the valuation of earnings, influenced largely by interest rates, and the earnings themselves). There may indeed be something to the bears’ claim.
Eoin Treacy's view
Here is a link to the full report.
Some of the biggest movers in the US market since the beginning of January have been the eight mega-cap household names stocks. Tesla and Nvidia rebounded impressively while Alphabet has been a clear laggard and all largely because of enthusiasm about the promise of AI.
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Ken Griffin's Citadel Securities Discloses 5.5% Stake in Crypto Bank Silvergate
This article from CoinDesk may be of interest. Here is a section:
Market maker Citadel Securities has disclosed a 5.5% stake in Silvergate Capital (SI) worth about $25 million.
According to a Form 13G filed with the Securities and Exchange Commission (SEC), Citadel Securities is now the owner of roughly 1.73 million shares or a 5.5% stake in Silvergate, valued at $25 million based on Monday's closing price of $14.71.
A person familiar with Citadel Securities told CoinDesk that the filing is a result of the firm's options market making activities rather than a directional investment or stake in Silvergate. Citadel Securities makes markets in more than a million individual options at any time. For 13G filings, options positions are calculated based on long call positions, regardless of any offsetting short calls or puts, explained the person.
Meanwhile, trading firm Susquehanna also reported in a filing that it bought about 2.37 million shares, or a 7.5% stake, in Silvergate. The investment would be valued at about $35 million, based on Monday's closing price.
Alongside a modest rally in the price of bitcoin, Silvergate shares are higher by just over 5% on Tuesday at $15.53. Shares are down about 87% over the past year.
The moves come after BlackRock said it boosted stake in Silvergate last month. A filing showed that the asset management giant had a 7.2% stake in Silvergate Capital as of Dec. 31, as oppose to a 6.3% stake, reported a year earlier.
Eoin Treacy's view
Bitcoin is about 14 months out from the next halvening. That’s when the reward for successfully mining a new block on the blockchain will halve again. In previous cycles, the absolute low for the crypto winters occur about a year before the halvening and are retested around the time of the event.
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Eoin's personal portfolio: commodity long initiated and stock option long initiated
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
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