Video commentary for December 8th 2021
Eoin Treacy's view
Some of the topics discussed include: Dollar eases, Renminbi breaks out, Wall Street extends advance, oil and natural gas steady, broadening of breadth beginning to appear which supports the medium-term bull market.
Gundlach Sees 'Rough Waters' for Market as Fed Pursues Taper
This article from Bloomberg may be of interest to subscribers. Here is a section:
Gundlach, 62, said the reason why Fed Chair Jerome Powell characterizes the economy as strong, but not strong enough to allow for a rate hike at this point, is that the underlying condition is in fact weak -- artificially propped up by an unprecedented degree of stimulus.
Here are some other takeaways from Gundlach’s remarks:
He focused heavily on inflation, saying the annual pace of gains in the consumer price index could hit 7% in the next month or two. He ran through numerous inflation measures and pointed out that shelter costs have climbed significantly. He also said it’s possible that the CPI inflation gauge won’t drop below 4% throughout 2022.
Markets could face more volatility now that the Fed has said it might quicken its tapering program.
Gundlach reiterated that he bought European stocks for the first time in 12 years, which he disclosed a few months ago. He still owns some of those and they’ve done just OK until recently. He didn’t own emerging-markets equities, though he envisioned a scenario when they might outperform U.S. firms. “We’re looking for major opportunities” and emerging markets could be one over the next few years, he said.
The dollar has been in structural decline since 1985, he said, reiterating that the twin-deficit problem (that’s the current-account gap and the federal budget deficit) will cause the greenback to fall over time, which bodes well for emerging markets.
Eoin Treacy's view
I’ve been saying for most of this year that the Dollar is the lynchpin for a migration away from US Dollar assets. Wall Street has outperformed by a wide margin from the perspective of international investors since 2008.
The Nasdaq-100 has had an average annual return of 23.3% and the S&P posted 15.86%, versus between 9% and 12.4% for the Europe STOXX 600, Nikkei-225, S&P/ASX 200 (Australia) and the S&P/TSX (Canada).
Returns for India’s Nifty 50, Brazil’s iBovespa, Jakarta’s Composite and the Johannesburg All-Share mostly fell within the same band. The big outlier has been Brazil which massively underperformed with an average annual return of 1.49% over the last 13 years.
The Bloomberg Dollar Index has posted a robust advance over the last six months and is currently unwinding a short-term overbought condition but a sustained move below 1165 would be required to question the consistence of the advance.
The Asia Dollar Index is firming from the region of the trend mean. It is being aided by the resiliency of the Chinese renminbi which broke out to new highs today.
The Latin America Dollar Index is steadying from the region of the 2020 lows aided by the recent strength of the Brazilian Real and Mexican Peso.
The above charts suggest the Dollar index is being heavily influenced by the determination of the BoJ and ECB to be the last to tighten monetary policy. Meanwhile other currencies are gradually beginning to exhibit relative strength. China’s determination to refrain from disgorging liquidity into the economy has certainly supported the renminbi. That suggests regional currencies can appreciate without experiencing undue pressure.
Record exports sharply narrow U.S. trade deficit
This article from Reuters may be of interest to subscribers. Here is a section:
The trade gap plunged 17.6% to a six-month low of $67.1 billion. That was the biggest percentage drop since April 2015, reflecting an increase in the flow of goods and services following disruptions caused by the COVID-19 pandemic.
Economists polled by Reuters had forecast a $66.8 billion deficit. Exports accelerated 8.1% to an all-time high of $223.6 billion. The surge was led by goods exports, which soared 11.1% to $158.7 billion, also a record high.
Exports of industrial supplies and materials increased $6.4 billion, with shipments of crude oil advancing $1.2 billion.
Petroleum exports were the highest on record.
Capital goods exports increased $3.1 billion, boosted by other industrial machines as well as civilian aircraft. Food exports rose by $2.1 billion, with soybeans increasing $1.8 billion. Exports of consumer goods jumped $1.6 billion, lifted by increases in shipments of gem diamonds as well as motor vehicles, parts and engines.
Eoin Treacy's view
Energy independence is an oft underestimated factor in any country’s economic health. That’s particularly true of the USA which is still unaccustomed to the benefits of being a major exporter of a commodity much of the rest of the world is in dire need of.
The USA is now in the privileged position of no longer being the biggest consumer of oil and gas but being among their biggest exporters. That’s a significant factor in insulating the broad economy from energy pressures. It also has the potential to turn the Dollar into a proxy for commodity currencies.
These factors are particularly relevant for the natural gas market which a wide arbitrage exists with European prices. Demand for LNG tankers and port facilities is likely to continue to ramp higher and not least because of uncertainty about Russia’s ambitions in Ukraine.
European natural gas continues to build support at significantly higher levels than anyone would have thought possible in years past.
US natural gas is currently steadying in the region of the 200-day MA.
Exmar remains in a relatively consistent uptrend as it firms from the region of the trend mean. Golar LNG (NASDAQ:GLNG) has a similar pattern. Teekay LNG Partners is on the cusp of being taken private.
Vodafone Shares Jump After Betaville 'Uncooked Alert'
This note from Bloomberg may be of interest to subscribers. Here it is in full:
Vodafone shares rose as much as 3.3% following a so-called “uncooked” mention in a Betaville report regarding potential private equity interest in the telecom operator. Shares pared gain to 1.8% as of 4:18 p.m.
Representatives for Vodafone were not immediately available to comment when contacted by Bloomberg via phone and email
Betaville says there is speculation that one of Europe’s largest private equity firms is looking at all of some of Vodafone, citing people following the situation
NOTE: The speculation is described as “uncooked,” a term the Betaville blog often uses to refer to market gossip
NOTE: Vodafone shares have declined 5.9% YTD vs Stoxx Telecoms Index’s 9.5% gain
READ: Private Equity Rummages in the Telco Bargain Bin: Chris Hughes
Eoin Treacy's view
One of the biggest questions for investors today is how to hedge a portfolio against inflation. The answer is not easy. Finding a business that has strong cash flows with the possible of passing on incremental price increases is a strong contender for the most attractive contender.
Vodafone, along with many other major network owners, has languished over the last few years. The share bottomed following a seven-year downtrend in 2020 and has been forming a base since. A sequence of higher reaction lows remains in place which lends a mild upward bias to the chart. The price is currently firming from the most recent low.
AT&T is pricing in the high potential for a dividend cut in the aftermath of completing the demerger of Warner Media and merger with Discovery. AT&T will then retail ownership of 40% of the combined entity. The share bounced last week from the $22 area and has so far held that low. As we approach the end of the year, investors may begin to accumulate oversold stocks like this in the hope that bargain hunters will return at the beginning of 2022. (Also see Comment of the Day on November 15th 2021).
It's official: 96 container ships are waiting to dock at SoCal ports
This article from freightwaves.com. Here is a section:
The Marine Exchange has just unveiled its new methodology for counting container ships waiting outside the 40-mile “in port” zone.
A new queuing system has been in place since mid-November that encourages container ships to wait outside of a specially designated Safety and Air Quality Area (SAQA) that extends 150 miles to the west of the ports and 50 miles to the north and south.
This has sharply reduced the number of ships closer to shore, leading to suggestions that efforts to tackle port congestion are cutting into the offshore queue — a misconception that should be dispelled by the Marine Exchange’s new counting method.
In addition to the 96 ships waiting offshore on Friday, there were 31 container ships at terminal berths, bringing the grand total to 127, at or near an all-time high. The total number of container ships either at berths or waiting offshore continues to rise: It is up 25% from the beginning of November, 41% from the beginning of October and 79% from the beginning of September.
Eoin Treacy's view
How do politicians achieve quick results? The easiest way is to change the way the data is collected. If you don’t like how house prices distort the data, take rents instead. If oil is too volatile just leave it out. If the number of ships weighting a for a berth is embarrassing, and the problem does not have an easy fix, just change how you count.
The Chart Seminar 2022
Eoin Treacy's view
With global vaccination rates rising, the prospect of anti-COVID pills on the horizon and the promise of travel restrictions being dropped, it is time to start thinking about venues for The Chart Seminar in 2022. Please drop sarah@fullertreacymoney.com a line if you would be interested in attending an event next year, as well as your preferred location. At present the two locations with greatest demand are London and Dubai.
Eoin's personal portfolio: breakeven stop triggered November 25th 2021
Eoin Treacy's view
One of the most commonly asked questions by subscribers is how to find details of my open traders. To make it easier I will simply repost the latest summary daily until there is a change.
My breakeven stop in the Nasdaq-100 was triggered today 16400 against my sale at 16402 including spread-bet dealing costs.
I increased my platinum long on August 27th paying $1002 for another position. My existing platinum longs were purchased at $1072 and $885. I remain of the view that precious metals are still cheap and are to be bought on significant dips.
I also continue to hold my silver trading position, initiated at $23.7. I will buy more if the current reaction deepens.
I have been saying for months that I have purchase orders below the market in gold and silver. The first of these was triggered on August 9th. I was filled at $1702.3 including spread-bet dealing costs. My original positions were opened in Q4 2020 at $1879.2 and $1818.6. That reduces by average purchase price to $1800.
I still have additional bids in the market below prevailing prices in gold and silver and will leave them in place to take advantage of any possible additional volatility. These are leveraged trading positions rather than medium to long-term investments.
With baby steps trading one has to have high conviction prices will recover and the patience to buy on weakness before eventually being proved right; hopefully.
Among my investments, my original position in the VanEck Vectors Gold Miners ETF was purchased on March 25th at $20.12. I bought another unit at $35.79 on December 1st. I continue to shop for opportunities in the gold sector.
My two investment positions in Rolls Royce were purchased at 154.75 and 105p respectively. I also took up the rights issue which has resulted in an average purchase price of 54.63p. Rolls Royce continues to form a first step above the Type-2 base formation.