Coffee and O.J. tank

As featured in my latest weekly edition on Macro Extremes, Coffee and Orange Juice were touching ‘weekly’ Overbought ‘extremes’……

https://robzdravevski.com/2021/08/01/macro-extremes-week-ending-july-30-2021/

These commodities have declined 14% and 10% respectively over the past 4 trading sessions.

It’s not easy calling a reversal in trend but when prices rally sharply and somewhat parabolically, probability of a decline or mean reversion increases.

It does help tell you one thing…..be careful initiating a Long when ‘weekly’ Overbought extremes are being registered.

August 3, 2021

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending July 30, 2021)

The following assets (on a weekly timeframe) registered an Overbought reading or traded more than 2.5 standard deviations above its rolling mean.

Extremes “above” the Mean (at least 2.5 standard deviations)

USD/KRW (signifying a weaker Korean Won)

Overbought (RSI > 70)

Tin (for the 14th week)

Gasoil

Heating Oil

Gasoline

Hot Rolled Coil Steel

Natural Gas

Coffee

Orange Juice

the CRB Index

Switzerland’s SMI equity index (for the 7th week)

Australia’s ASX 200

Amsterdam’s AEX index

France’s CAC-40 index

and the Stockholm, Copenhagen and Helsinki equity indices.

The Overbought Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)

Nil

Assets (securities) within my immediate universe which touched the other side of the extreme, being Oversold (where the RSI is < 30) or were at least 2.5 standard deviations below its mean are;

Extremes “below” the Mean (at least 2.5 standard deviations)

the U.S. Government 10 year bond yields,

the U.K.,  Chinese, Korean and Swedish 10’s,

AUD/JPY (signifying a strong Yen versus a weaker AUD),

the Hang Seng Index, 

the Hang Seng China Enterprises Index

and the Shanghai Composite.

Oversold (RSI < 30)

Nil

The Oversold Quinella – Both Oversold and Traded at < 2.5 standard deviations above the weekly mean)

Nil

Notes & Ideas:

The decliners included Iron Ore (15%), Coffee (5%) following last weeks 17% rise), Natural Gas (3.6%), Orange Juice (3.2%), the Hang Seng Index (6%) and the Shanghai Composite (4.3%).

Advancers were dominated by commodities where Brent and WTI Crude, Cocoa, Tin, Gasoil & Gasoline all rose 2% for the week. Aluminium climbed 3.7%, Hot Rolled Coiled Steel soared 6% and Heating Oil & Wheat advanced 3%.

The U.S. 10 year bond yield fell albeit muted when compared to the past month’s action. The yield fell from 1.28% to 1.23%. 

The 10’s remain bound in a larger range but we watch it broader capital markets could become explosive is the 10’s break decisively either below 1.25% or above 1.65%.

No cryptocurrencies registered any Extreme readings.

And lastly, Bitcoin is trading 193% above its 200 Week Moving Average, which is notably higher than last week’s 145% reading and certainly lower when compared to its 466% peak in mid-April 2021.

August 1, 2021

by Rob Zdravevski

rob@karriasset.com.au

Perspective and Hypocrisy

What is the big deal with the Chinese government’s recent directives stymying technology or education firms?

During the 2010’s, the U.S. Department of Education either forced the closure or change of ownership, sued or ended accreditation or recognition of ‘education providers’ such as DeVry Education Group (now Adtalem Global Education), ITT Educational Services, Corinthian Colleges and Apollo Education (which was taken private at $10 per share, compared to its high of $89/share in 2009).

For example, then Californian attorney-general, Kamala Harris led the charge in suing Corinthian (leading to their demise in 2016 when she won her judgement) for predatory practices of mounting and leaving students in crippling debt……much like China’s concerns today.

In addition, didn’t the U.S. government force the break-up of AT&T and Microsoft?

And I wonder……aren’t Google, Facebook, Microsoft, Apple etc, some type of pseudo-government agencies ?

or at least, at their behest or influence?

Between all the congressional hearings and testimonies and the ‘cloud’ of anti-trust undertakings, a little perspective is required to the current Chinese news.

After all, it is not a far-fetched idea that Amazon is forced to ‘spin-off’ its AWS division.

The hypocrisy of western governments doesn’t seemed to be recognised by their own selves. They apply a host of restrictions, rules and bans too.

Perhaps China is entering its own Progressive Era and the U.S. may have its own 2.0 version?

https://www.bloomberg.com/news/articles/2021-07-27/china-tech-crackdown-xi-charts-new-model-after-emulating-silicon-valley?sref=qLOW1ygh

July 30, 2021

by Rob Zdravevski

rob@karriasset.com.au

Alternatives to chemical based plastic

PLA’s and PHA’s is a technology which interests me greatly. 2 stocks listed in this article feature amongst some client portfolios.

Take your pick – Thorium or Uranium

While I have hinted that I am bullish on nuclear energy and uranium……I have been an avid watcher of thorium which has been seen as a nascent alternative but in truth it has existed for some time. Its evolution has been retarded for a host of political and capitalist reasons.

An extract from this article says, “China has some of the world’s largest reserves of thorium, a silvery metal with weak radioactivity. By some calculations it has enough to meet the country’s energy needs for at least 20,000 years. By contrast, China has some of the lowest uranium reserves of any nuclear-capable country”.

https://www.neimagazine.com/news/newschina-moves-forward-with-thorium-molten-salt-reactor-8919220

Who bothers to read a prospectus?

Whether this is a harbinger is another matter.

Robinhood is about allow its equity to be publicly traded.

As I harp on about ‘doing your research’, notice that 73 pages (of the 400) in the prospectus is dedicated to ‘Risk Factors’

https://www.sec.gov/Archives/edgar/data/1783879/000162828021013318/robinhoods-1.htm

July 29, 2021
by Rob Zdravevski
rob@karriasset.com.au

Stock-picking over Indexing

I am (and have been) positioning portfolios for rising inflation.

Because of this view, I think certain sectors will perform better than others (see sector rotation) and as a function of my business, my focus is picking the better companies to be invested in.

This is dominated by placing an emphasis on the ‘risk’ part of an attractive risk/reward opportunity.

In other words, try to take the least possible risk while seeking an adequate return and picking the stocks with tailwinds should take care of the rest.

In turn, due to many reasons (including a large overweight to technology), I think broad-based index tracking ETF’s (and the indices themselves) will be poor performers in the coming years.

It’ll be evident which money managers are index huggers.

I’m not being dangerous nor a maverick but I can’t help observe that in the asset management industry, all that a fund manager needs to do is, make sure their performance is similar and close to the rest of the sheep.

It’s safer staying with the flock…..you get to keep your job, retain assets and keep the gravy train chugging along.

I dare to say, that diversification certainly helps you achieve one common thing…….it’s that you are able to lose less money than others.

July 29, 2021

by Rob Zdravevski

rob@karriasset.com.au

HSCEI – most oversold in 5 years

“Keep your head while others are losing theirs”, in paraphrasing a Rudyard Kipling quote I am paying to attention to investing opportunities in selected listed Chinese companies.

When everyone is ‘hating’ on something vehemently, it’s OK to explore the antithesis.

The Hang Seng China Enterprises Index (HSCEI) closed on Tuesday July 28, 2021 at 8,880 and has fallen 27% from a recent high seen 5 months ago, to now being at its most Oversold Weekly reading since February 2016.

While there will be some finesse to determining an entry point and downward momentum shouldn’t be dismissed, it’s always worthy of scouring for mis-pricing’s when an index falls 12% within 3 trading days.

Incidentally, the SSE (Shanghai) Composite has ‘only’ declined 5.5% over the same time.

I’ll look for the HSCEI to test the 8,550 level which is 3.7% lower than yesterday’s close, it should hold 8,300 but current levels are interesting enough.

3 weeks ago, I wrote this note.

July 28, 2021

by Rob Zdravevski

rob@robzdravevski

17 Year chart of the Hang Seng Enterprises Index (on a weekly basis)

Portuguese 10 Year Government Bonds

Are they such high quality that they deserve a yield of 0.21%?

Perhaps 0.62% is more appropriate?

Shorting here is worth doing some work?

July 26, 2021

by Rob Zdravevski

rob@karriasset.com.au

Let’s move to Calgary?

you’d get a bargain,
let’s move to Calgary?
If we can ‘work from anywhere’….
Why not?
1.5 million people,
A good ‘COVID’ profile,
Bannf is nearby,
The sunniest city in Canada 🇨🇦,
An international airport ✈️: 3 hours to LA, 4 hours to Dallas and 9 hours to London.

https://www.bnnbloomberg.ca/calgary-s-downtown-office-vacancy-rate-hits-new-high-at-29-2-1.1631820#.YP4KGhAlUh0.linkedin

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