Comment of the Day
Video commentary for July 27th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Fed raises rates by 0.75% again, Dollar eases as other central banks play catch up stocks rebound, oil and gold firm,
Morgan Stanley (NYSE:MS)'s Slimmon Recommends Bargain Hunting in August
This article from Bloomberg may be of interest to subscribers. Here is a section:
For Slimmon, the beat-down in consumer sentiment has gone far enough to warrant betting on a turnaround.
“There’s a very low expectations in those stocks right now. What if the direction of change is actually higher for consumer sentiment?” he said. He views the risk-reward as attractive.
“Those stocks might recover dramatically because they’re down so much.” He plans to snap up shares “well into the weakness” in August, which is among historically the worst months for equities as volumes are thin and workers are on vacation.
Stock market moves during this period are usually dominated by macro events. “The macro story this year is not very good,” he said, citing a global geopolitical crisis and the lack of an August meeting among Fed officials.
“The focus of the market shifts from what ultimately long-term drives stocks, which is earnings. And when the shift goes to other things like macro events that creates volatility.”
As for those areas he will likely stay away from, he offered two sectors. “If you think about what’s worked year-to-date on a relative performance basis, there are two groups that have really done well: energy and defensives,” he said. “It’s a little late to be selling the energy stocks. They’ve been so creamed. I wouldn’t be aggressively buying those stocks.”
My view - Many investors are anticipating the Jackson Hole conference in August will be a time for central bankers to declare the peak for inflation is in. The most risk tolerant traders are initiating long positions today to ensure they have the cushion of rebound ahead of that event. There is clear scope it will be a buy the rumour and sell the news event if central bankers fail to deliver.
The incredible plan for a 170-km-long skyscraper in the Saudi desert
This article from NewAtlas may be of interest to subscribers. Here is a section:
The Line was unveiled by HRH Crown Prince Mohammed bin Salman and no construction date or expected completion date has been announced. Indeed, given the size of complexity of such an undertaking, it would be more than fair to be a little skeptical about it ever being realized, even just the basics like transporting enough building materials and pouring the foundations seems like it would be a considerable undertaking.
But if anyone could make it happen it’s someone with the deep pockets and capability of the Saudi Crown Prince, who with an eye to a fossil fuel-free future is very keen to transform his country’s oil-dependent economy into a tourist-friendly one. With this in mind he has already unveiled a slew of ambitious projects including BIG's so-called Giga Project.
My view - Breaking ground on the tallest building in the world has generally coincided with major market tops. It’s often referred to as the skyscraper effect by analysts of past cycles. The logic is clear. It takes an historically high sense of optimism to engage in building the tallest building a country or the world has ever seen. That peak of optimism is generally coincident with the peak of the global real estate cycle where prices have been rising for long enough to dispel any doubt they will continue to do so.
Rio Tinto Says Simandou Deal Close After Wrangles Over Railway
This article from Bloomberg may be of interest to subscribers. Here is a section:
Simandou offers a potentially huge new source of supply for Rio, the world’s largest iron ore producer, while China sees the project as key to easing its steel industry’s dependence on Australian output. The world’s top steel-producing nation recently embarked on one of the biggest shake-ups of the global iron ore market in more than a decade by setting up a new state-owned group, designed to be a hub for huge overseas mine investments and buying the steelmaking material from international suppliers.
My view - Simandou might be a big deal of Rio Tinto but it is much more strategically important to China who chaff at their dependence on Australian exports. If the Guinea project comes online they will have greater control over iron-ore supply and will no longer be held hostage to the oligopoly of Rio Tinto, BHP and Vale.
Email of the day on fishing and mosquitoes
What a catch! How did you get it back home to Dallas? I hope you didn't suffer from the notorious Alaskan mosquitoes, so ravenous at this time of year.
My view - Thank you. It’s a 18lb beautiful king salmon. The boatman said it would have won a prize at the local fishing competition a few weeks from now. Thankfully, the processing facility was right next to the dock, so they filet and flash freeze the catch immediately. The price was reasonable and the Fedex overnight rate was only $45. Believe it or not, we did not encounter a single mosquito. It might have been too rainy/windy for them to fly.
Eoin's personal portfolio: leveraged positions in commodities closed July 6th 2022
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 daily until there is a change.