Comment of the Day
3rd July 2023
Eoin Treacy
Jul 4
Video commentary for July 3rd 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: value stocks and sectors staging a recovery, oil weak, bitcoin firm, capital trends towards consolidation and eventually foments antitrust.
Capital Trends Towards Consolidation
Eoin Treacy's view
The best, most innovative, and flexible companies continue to grow and erode the competitive edge of their less significant rivals. Those that cannot compete go into long relative and eventually absolute declines.
When the FANGMAN acronym was first created it did not include Tesla. Then Tesla became so significant it was added in. Now Netflix has failed to keep pace with the appreciation in the fortunes of the largest companies so the group is back to seven constituents. That reordered group now occupies more than half the Nasdaq-100.
A lot has to go right for companies to be granted high valuations. It’s not only a story, but there also has to be a fundamental basis too. For Apple, navigating the Chinese market, where they manufacture and sell without falling foul of the government censor is one of the most significant diplomatic success stories in history. For Microsoft, the embrace of subscriptions was a landmark event. Amazon’s foresight in dominating the datacentre market and disintermediating the reseller market were equally impressive. Tesla has mastered the art of regulatory arbitrage. Carbon taxes its competitors buy, help pay for the company’s factories.
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Bitcoin Bulls Are Testing The Year's High With Liquidity Light
This article from Bloomberg may be of interest to subscribers. Here is a section:
“Historically liquidity is definitely lower around holidays and combined with a relatively large increase in leverage recently, prices will be more susceptible to sharp movements,” said Kyle Doane, a trader at Arca. “The market is still leaning bullish and overall sentiment continues to improve.”
BlackRock refiled paperwork with the US Securities and Exchange Commission on Monday through Nasdaq to add new details to its proposal for an ETF.
A spot Bitcoin ETF has long been seen as the holy grail for the crypto industry, as a way to reach a broader swath of consumers, but the SEC has repeatedly rejected prior filings. Bitcoin reached almost $69,000 in late 2021.
Eoin Treacy's view
Bitcoin is a supply inelasticity meets rising demand environment at present. Supply cannot easily be increased but demand could surge with the introduction of a spot ETF. That is fuelling speculation about what it will take to get a project over the line.
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Pakistan Stocks Surge Most in 15 Years After IMF Loan Deal
This article from Bloomberg may be of interest to subscribers. Here is a section:
Financial support from multilateral lenders has boosted investor confidence — and returns — across troubled emerging and frontier markets in recent months, as funds were approved or disbursed for countries including Kenya, Tanzania, Senegal, Ukraine, Ghana and Ivory Coast. Other sovereigns in Africa, including Egypt and Mozambique, are expected to have their loans approved soon.
Inexpensive valuations are helping Pakistan’s market as well. Concerns related to the slew of negative headlines recently ranging from political turmoil to the risk of a debt default and sinking rupee had sent investors fleeing, with the KSE-100 Index becoming the world’s cheapest equity benchmark.
“Overall, the valuations are dirt-cheap with significant room for rebound,” said Ali Raza, head of international equities trading at BMA Capital, in Karachi.
Pakistan dollar bonds advanced, with the paper due in 2024 gaining 17 cents in the past week. The 8.25% 2024 bond was indicated 3.1 cents higher to trade at 73.6 cents on the dollar on Monday, a level last seen about a year ago in August. The gains come after dollar bonds notched their best-ever week. Pakistan’s currency market opens Tuesday.
Eoin Treacy's view
The jump in global interest rates and steady removal of liquidity has weighed heavily on frontier markets. The end of the USA’s war in Afghanistan, last year’s massive floods and slow recovery, as well as political upheaval have added to the negative perception of the Pakistan market’s potential.
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Eoin's personal portfolio: stock market leveraged long breakeven stop triggered June 26th
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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