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Investment Strategy by Jeffrey Saut

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Investment Strategy by Jeffrey Saut

Thanks to a subscriber for this article from Raymond James which may be of interest. Here is a section:

Since meeting him, Leon and I have exchanged many letters, reports, thoughts, conversations, etc. I received this one from him last week:

Hi, Jeffrey,

I calculate a three week moving average of the Bullish sentiment. Currently, it is abnormally low and [that’s] very bullish. Although long retired, many fund managers in Europe, Asia, and North America still call me and seek my view of the market. I can report to you that worldwide, investors are skeptical and fearful. Most are sitting on a mountain of cash. As you know, that is very bullish. My view remains that this great bull market is only in the early stages of the second leg. The first leg was from October 10, 2008 and ended in May, 2015 which was driven by an easy/accommodative monetary policy. The second leg started in February, 2016 which is always the longest and strongest as it is driven by improving economic conditions (due to the monetary stimulation of the past eight years) and accelerating earnings momentum which is what investors are seeing. As you know, since early last year, I’ve been of the view that investors are witnessing the biggest bull market on record and the end is nowhere near in sight. Also, I felt that when this bull market ends, it will be the wildest and wooliest speculative “blow-off” in history. There has never been so much liquidity created as in this cycle. Also, in my 55 years in this business, from a chart standpoint, I have never seen so many humongous bottoms in so many different industries as in this cycle. Many are 15 years and longer. In the 50s, it was mostly in anything electric/electronic and in the 90s, it was mostly high tech. In this cycle, except for the resource sectors, big bottoms are found everywhere. One of technical prerequisites for a long, sustained bull market is that many stocks must trace and break out of long bases. Putting my money where my mouth is, I own a few of the small and micro caps in the Biotech/Health Care area.

 

Eoin Treacy's view

The news headlines are awash today with news that the best performing ETF this year is the short VIX Index XIV. This is one of the least volatile periods in the market since the 1990s and has delivered a very consistent chart pattern for the S&P500 which has been trending in a step sequence staircase manner since early January.

 

Mr Grey, Mr Blond and Mr Brexit: battle of the big guns

This article from The Sunday Times over the weekend may be of interest to subscribers. Here is a section:

It is a measure of the prime minister’s weakness that the Davis-Johnson rivalry is not even the most serious row tearing the government apart. Last Tuesday’s cabinet meeting — and a second “political cabinet” that followed it — were the most fractious gathering of May’s top team since she took power a year ago last week.

In both meetings ministers became enraged by the behaviour of Philip Hammond, the chancellor, and what his colleagues regard as his “tin-eared” approach to the election result.

Since June 8 cabinet ministers have been lobbying for the government to end the 1% cap on increases in public sector pay to placate voters sick of austerity who flocked to Jeremy Corbyn’s Labour Party. His insistence on financial discipline despite a fresh onslaught on Tuesday drew a “collective intake of breath” from other cabinet ministers. He singled out train drivers as “ludicrously overpaid”.

The chancellor, who has a reputation for condescending to his colleagues, got into hot water when he sought to suggest that newly automated trains would help stamp out strikes because the overpaid men could be replaced by women.

 

Eoin Treacy's view

In calling an election Theresa May was perceived by the UK’s astute voters to be attempting a power grab rather than serving the country’s best interests. What does not appear to have gotten much air time is that the results of the election closely mirror the results of the Brexit referendum; with the government securing a narrow majority but not a conclusive landslide victory.

 

Bitcoin Split Risks Increase

This article by Andrew Quentson for Bloomberg may be of interest to subscriber subscribers. Here is a section:

As such, we are likely to have at least two bitcoins on August the 1st, but there may be even more. Bitcoiners, therefore, are strongly advised to not transact on that day until the situation becomes more clear.

Once the chain does split, BitcoinABC will probably be listed in at least one exchange, thus a period of high volatility and perhaps even trading frenzy should be expected as the market passes judgment on the value of the bitcoins.

Eventually, the dust will likely settle with one coin probably gaining some 80% or so of the current bitcoin value, while the minority coin can continue operating in their own network, free to follow their own roadmap and vision.

Which one will be which only the free market can tell us sometime next month as bitcoin finally makes a monumental and probably highly historical decision, at least for this space.

 

Eoin Treacy's view

Bitcoin was set up so that no more than 21 million coins could ever be mined. More than 16 million have already been created, with the complexity of each successive block growing progressively more expensive to solve.  With bitcoins already priced out to 6 decimal places that limitation has asked legitimate questions about the sustainability of the global market when supply is so limited. That has led to a debate between monetary purists and miners who want to support the value by withholding supply and others who wish to see dynamic supply to allow the market to grow.

 

Sweeping Wildfires Burn Canada's Timber as Lumber Prices Surge

This article by Jen Skerritt for Bloomberg may be of interest to subscribers. Here is a section:

Sweeping wildfires across Canada’s British Columbia are threatening timber supplies and sending lumber prices surging.

More than 375 fires have swept across the province, burning forests and forcing sawmills to shut down or evacuate. While the impact on supplies is minimal so far, there are concerns that the blazes will continue to spread amid hot, dry conditions, according to Paul Quinn, an analyst at RBC Capital Markets in Vancouver. Lumber futures on Monday jumped by the exchange limit in Chicago to the highest in more than two months.

“Forests are getting burnt, so that has a supply impact,” Quinn said by telephone. “The worry is they’ll continue to grow and get bigger,” he said, referring to the fires.

Last week, West Fraser Timber Co. suspended operations at three lumber mills that represent annual production capacity of 800 million board feet of lumber and 270 million square feet of plywood. Norbord Inc., the largest North American producer of oriented strand board used in residential construction, has also suspended production at its mill in 100 Mile House in central B.C.

On the Chicago Mercantile Exchange, lumber futures for September delivery rose by the $10 trading limit to $387.30 per 1,000 board feet at 11:37 a.m. local time. That’s the highest price for a most-active contract since May 9. Aggregate trading for this time is 44 percent above the 100-day average, according to data compiled by Bloomberg.

Cash prices for some grades of lumber rose 7 percent last week, Quinn of RBC said. “We’re at the seasonal peak in construction activity, so anything that reduces supply will create some pricing tension,” Mark Wilde, an analyst at BMO Capital Markets in New York, said in an email.

 

Eoin Treacy's view

According to this article British Columbia has spent about $80 million in the first few weeks of the fire season compared with $100 million in all of last year. That gives us an idea of how large the issue is and firefighters expect to be fighting conflagrations for the next few months.

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