rob zdravevski's blog

Macro Extremes (week ending April 16, 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)

Russia’s MOEX10 Index



Overbought (RSI > 70)

Canadian 10 year bond yields (for 9th consecutive weeks)

The Commodities Indices (the CRB and Bloomberg’s)

Iron Ore

Aluminium (for 8th consecutive weeks)

Copper (for 18th consecutive weeks)

Lean Hogs (for the 9th consecutive week and its highest price since September 2014)

Corn (for the 19th consecutive week & trading 52% above its 200 Week Moving Average)

Soybeans (for the 6th consecutive week)

S&P 500 Index (for the 2nd consecutive week)

Dow Jones Industrial Average (for the 2nd consecutive week)

S&P Mid Cap 400 (6th consecutive week)

U.S. KBW Banking Index (7th consecutive week)

Nasdaq Transportation Index  (7th consecutive week)

Dow Jones Transport Index (6th consecutive week)

Sweden’s OMX 30 Index (6th consecutive week)

Germany’s DAX Index (2nd consecutive week)

France’s CAC-40

South Korea’s KOSPI Index

Bitcoin & Ethereum



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

Australia’s ASX 200 Index

Lumber (having risen 26% in past 2 weeks)

Cryptocurrencies – Litecoin, Dogecoin, EOS and Ripple

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)

Nil



Oversold (RSI < 30)

Nil



Notes & Ideas:

Notably, no currencies are Overbought this week. Many of them have corrected from those high extremes from recent weeks and have since traded 2-3% lower.

The same can be said for the ‘highs’ seen in a host of global bond yields. Following from last week, bond buyers have been the more aggressive participants of the trade, sending most yields lower this past week.

My memory can’t help recite past moments where FX and Debt have pre-empted the next move for Equities.

The emerging group of assets visiting Overbought territory are the Equity Indices.

The most famous visitor is the S&P 500, while Australia’s ASX 200, Germany’s DAX and France’s CAC-40 are worth noting as well.

Overbought weekly streaks in U.S. Transports, U.S. Banking, U.S. MidCaps, along with Corn, Soybeans, Aluminium, Copper & Lean Hogs continue…….

Be cognisant that streaks do come to an end, let alone does mean reversion beckon.

Some commodities in the energy complex are nearing Overbought readings, although not yet…those being Gas Oil, Brent Crude, Heating Oil.

And, Bitcoin has rise 3.4% higher for the week and is trading at 442% above its 200 Weekly Moving Average.



April 17, 2021

by Rob Zdravevski

rob@karriasset.com.au

There is trickery in dem hills

Stop being duped by the financial media.

Coinbase is a failed IPO.

In fact, it’s not an IPO. It was simply a listing.

The company released a “reference price” of $250 per share.

The company didn’t raise money, which means no one was able to buy shares prior to the first day of trading, thus the reference price is not relevant.

On its first day as a public company, it opened trading $381, it then hit a high of $429. A day later it traded down to $317 and now it’s at $342.

The first public price discovery of this stock price occurred at $381.

This “IPO” is down 10% from its opening ‘print’.

It’s not up 37% from its $250 “IPO” price.

The reference price is a misleading figure made up by the company.

April 17, 2021

by Rob Zdravevski

rob@karriasset.com.au

I’ve started reading Jamie Dimon’s annual shareholder letter.

But I had to chuckle at the opening paragraph descriptor a particular news source gave Mr Dimon, introducing his letter;

“In his annual shareholder letter, the long-time JPMorgan Chase chairman and CEO said he sees strong growth for the world’s biggest economy……..”

“the long-time chairman and CEO” has been the case and title held since 2007.

You see, when you hold both offices, it’s impossible for Mr Dimon (as the Chairman) to fire himself as the CEO.

Corporate America is littered with examples where the Chair and CEO are the same person.

Approximately, 40% of S&P 500 companies have their chairperson also serve as the chief executive. This is being heralded as quite an achievement for a decade earlier, about 70% of companies were commandeered by the same person.

https://hbr.org/2020/03/why-the-ceo-shouldnt-also-be-the-board-chair

Can we consider these positions are ‘for life’ ?
If so, it’s quite a dichotomy for ‘democratic’ America.

April 13, 2021

by Rob Zdravevski

rob@karriasset.com.au

Watch if Chinese PPI feeds into U.S. CPI

Whether it’s ‘year on year’ or from last month, Chinese PPI rose more notably during March 2021, while its CPI was subdued.

https://www.scmp.com/economy/china-economy/article/3128852/china-inflation-factory-gate-prices-jump-again-march

China’s official producer price index (PPI) rose to 4.4 per cent in March compared with 1.7 per cent in February while;

China’s consumer price index (CPI) rose to plus 0.4 per cent in March compared to minus 0.2 per cent in February.

Is there difficulty in passing on price rises?

It’ll be more relevant to watch China’s April CPI to see if there is a lag or….it could also be a case of consumers are choosing to not consume and pay the higher prices ?

I found this quote from another source relevant;

“Our research has found that China’s PPI has a high positive correlation with CPI in the U.S.,” said Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group Ltd. “The higher-than-expected PPI data could impact people’s judgment of inflation pressure in the U.S. and globally, and this impact shouldn’t be underestimated.”

April 13, 2021

by Rob Zdravevski

rob@karriasset.com.au

It’s all about the fees

Don’t let the framing of benevolence and conscience fool you about such initiatives.

Early stage funds equal “high-risk” and often suggest a minimum 10 year participation.

This also means a long life of fees generated.

Let’s check back in 2032 – 2035 and see how the returns stack up.

https://www.bloomberg.com/news/articles/2021-04-12/blackrock-and-temasek-are-raising-billions-to-invest-in-carbon-cutting-startups?sref=qLOW1ygh

Macro Extremes (week ending April 9, 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)

ASX 200 (new entry)

USD/SEK (indicating a weak Swedish Kroner, thus your IKEA stuff should be cheaper)

Overbought (RSI > 70)

Canadian 10 year bond yields (for 8th consecutive week)

Korean 10 year bond yields

U.S. Government 5 & 10 year bond yields (for 8th consecutive week)

Aluminium (for 7th consecutive week)

Copper (for 17th consecutive week)

Lean Hogs (for the 8th consecutive week and its highest price since September 2014)

Corn (for the 17th consecutive week & trading 51% above its 200 Week Moving Average)

Soybeans

S&P 500 Index (new entry)

Dow Jones Industrial Average

S&P Mid Cap 400 (5th consecutive week)

U.S. KBW Banking Index (6th consecutive week)

Nasdaq Transportation Index  (6th consecutive week)

Dow Jones Transport Index

Sweden’s OMX 30 Index (5th consecutive week….Swedish equities have been rising against a leaking Kroner)

Germany’s DAX Index 

Bitcoin & Ethereum

and the Copper/Gold Ratio 

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

Live Cattle



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)

Nil

Oversold (RSI < 30)

Cocoa



Notes & Ideas:

Overbought weekly streaks in U.S. Transports, U.S. Banking, U.S. MidCaps, Canadian and American Government bond yields along with Corn, Aluminium, Copper & Lean Hogs continue…….

Be cognisant that streaks do come to an end.

Speaking of which, recent extremes have since pulled back, such as the Swedish 10’s have eased back from 0.48 to 0.37, the USD/DKK is commencing some mean reversion fro 6.35 to 6.25 as has the EUR/USD, while on the flip side, EUR/GBP bounced from its Oversold reading.

I’ve also heard a mention that with Corn prices being so high, it’s becoming too expensive to feed to equally the highly priced Pigs.

Watch the recent call I’ve made going “long” bonds, specifically the U.S. Government 5 bond yields (now in their 8th consecutive week of Overbought extremes).

As a buyer of the bond, the inverse reaction is for the yields to fall.

Incidentally, the 5 year bond yield this week has eased from high of 0.99 to 0.86

In fact, government bond yields across the world have seen notable declines (from their highs earlier in the week), thus suggesting bond buyers were more dominant and aggressive.

Probability has increased for a pullback in the U.S. Mid-Cap 400, U.S.  Banks & Transports indices.

A notable new entry into the Overbought territory is the S&P 500 Index….

and the ASX 200 Index.

France’s CAC and Spain’s IBEX are close to being Overbought…I’ll watch that during the week. 

And, Bitcoin has risen higher, to trade at 443% above its 200 Weekly Moving Average.



April 11, 2021

by Rob Zdravevski

rob@karriasset.com.au

How do you lose $6 billion ?

So Credit Suisse dusts $4.7 billion while doing business with Archegos and perhaps a further $1.5 billion for working with Greensill Capital.

(= to 25% of its market cap)

Aren’t these types of financial institutions touting themselves as the ‘best of the best’?

Once again, people have handed over money into investments, funds or products which they may not know what is inside them…..and in some cases, redeeming your money is neither quick nor possible.

Extracts from the article;

“The firm will take a 4.4 billion franc ($4.7 billion) writedown tied to its Archegos exposure”

? Why does it have ‘exposure’ ?
? What counter-party risk exists or was taken ?
? I wonder if assets have been hypothecated over and over again ?

“The firm is still set to give an update on the effect of last month’s collapse of Greensill Capital, which helped manage $10 billion of investment funds the Swiss bank offered to clients.”

This next sentence floors me….

“Credit Suisse is leaning toward letting clients take the hit of expected losses in those funds, a person familiar with the discussions said.”

? Do they mean to say, Credit Suisse pondered wearing the loss for clients ?
? If so, what does that imply ?

Hear what is not being said.

April 7, 2021
by Rob Zdravevski
rob@karriasset.com.au

https://www.bloomberg.com/news/articles/2021-04-06/credit-suisse-takes-4-7-billion-archegos-hit-replaces-warner?sref=qLOW1ygh

Semiconductors are quite stretched

Parabolic?
Mean Reversion?
A semiconductor chip shortage is news recently,
but going “long” now is something some may be doing at the wrong end of the cycle or story….

The SOX index is now trading 100% above its 200 Week Moving Average….that’s its weekly average, not daily.

April 8, 2021
by Rob Zdravevski
rob@karriasset.com.au