Start-ups or established publicly listed?

Techcrunch published a graphic showing that 50% of investment returns from Venture Capital Funds are less than 1 times the capital invested AND that only 5% of returns resemble 3x.

Shares in Exxon are closing in on a 4x return over the past 30 months and Alcoa shares produced a 12x return in recent times.

February 13, 2023

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending February 10, 2023)

A weekly Macro, Cross Asset review of prices trading at extremes which may generate future investment ideas and opportunities.

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

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

Russian 10 year government bond yield

Australian Coking Coal 

Nasdaq Composite and Nasdaq 100 Index

Overbought (RSI > 70)

German 2 year government bond yields

Cattle

Italy’s MIB equity index

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

Orange Juice

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

None

Oversold (RSI < 30)

U.S. 5 year yield minus U.S. 3 month bill yield spread

Natural Gas

Urea (U.S. Gulf) 

Urea (Middle East)

Baltic Dry Index

Rotterdam Coal

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

None

Notes & Ideas:

This week’s edition is complimented by referencing last week’s.

Those who exhibited ‘extremes’ then, aren’t now.

Equities were mostly flat. They were so benign that we saw many ‘inside weeks’.

Any notable losses were seen in the U.S. and Scandinavia.

Understandably, Turkish equities slumped (10%) during the week.

Although, the larger news is that the indices which appeared Overbought in last week’s are not, this week.

Amongst bonds, yields generally rose. The U.S. 2 year closed at its highest level since November 14, 2022.

In commodities, energy prices understandably bounced while precious metals eased with Lumber, Tin and Aluminium being the more notable decliners.

Natural Gas rose 4.3% for week. The probability of a positive week grew after the commodity completed its 7th consecutive losing week and simultaneously touched Oversold extremes…..

Speak of losing streaks, Urea (U.S. Gulf) has seen 9 consecutive losing weeks. To boot 13 of the last 14 weeks have been negative as have 18 of the last 21 weeks.

Palladium and Platinum prices have fallen 16% and 14% respectively over the past 5 weeks.

Dutch TTF Gas and Rotterdam delivered Coal finally mean reverted to their 200 week moving average, thus honouring a retracement of the extraordinary parabolic moves seen in 2021 and 2022.

The latter has tanked 51% in the past 10 weeks.

Platinum also performed the same mean reversion. Now watching for Brent Crude to do the same, which although rose 8% for the week, has generally traded sideways for 5 months as is the same price as September 19, 2022.

Softs are in no-man’s land.

Orange Juice has soared 22% in 2 weeks, Cattle is Overbought for the 17th consecutive week and Tin is no longer 2.5 standard deviations above its weekly mean.

The Japan Korea LNG Marker (JKM) touched its lowest price since August 30th, 2021.

Shipping Rates weakened further with the Baltic Dry Index notching up a 7 week losing streak.

And a positive is that Australian Coking Coal has risen 17% in the past 2 weeks and 41% over the past 7 weeks.

In currencies, it was a boring and listless week.

The larger advancers over the past week comprised of;

Australian Coking Coal 7.l%, Gasoil 2.1%, Heating Oil 3.2%, Natural Gas 4.3%, Orange Juice 4.5%, Gasoline 7.9%, CRB Index 2.4%, Brent Crude 8.4%, Rice 1.9%, Wheat 3.9% and Argentina’s MERVAL rose 5.1% (and 11% over the past 3 weeks)

The group of decliners included;

Aluminium (4.8%), Rotterdam Coal (4.7%), Baltic Dry Index (3.1%), JKM (2.9%), Lumber (16.1%), Tin (4.3%), Palladium (5.8%), Platinum (2.9%), Dutch TTF Gas (6.8%), Urea U.S. Gulf (6.5%), Urea Middle East (7.7%), Silver AUD & USD (1.5%), Oats (1.8%), KBW Banks (1.8%), HSCEI (3.5%), HSI (2.2%), Nasdaq Composite (2.4%), S&P MidCap 400 (2.6%), Nasdaq Biotech (2.6%), Nasdaq 100 (2.1%), S&P SmallCap 600 (3.6%), Helsinki (1.9%), Stockholm (4.1%), Russell 2000 (3.4%), Swiss SMI (1.9%), SOX (2.3%), Mexico (2.9%), DJ Transports (3.1%) and Istanbul’s BIST Index slumped 10.2% 

For reference, the S&P 500 fell 1.1%, the DJ Industrials eased 0.2%, Toronto’s TSX fell 0.7%, the ASX 200 declined 1.7% and the ASX Small Caps swooned 4%.

February 12, 2023

by Rob Zdravevski

rob@karriasset.com.au 

The wickedness of the rally in coal stocks

I had a difficult time reading the equity rally in the Australian coal companies such as Whitehaven and New Hope.

I appreciated them being the lowest cost producer of energy but I couldn’t wrap my head around their profit estimates….

let alone their soaring stock prices.

I never owned them and they weren’t on my radar…but if I had bought Whitehaven Coal around $1 per share in the 2nd half of 2020, I can imagine selling at $3.00 or $3.80.

Whilst not being flippant nor ungrateful about an imaginary 300% return……can you see the pain that would’ve been inflicted watching it rise to $10.

All of those of supposed profits are not the point….I couldn’t ‘get a read’ and understand it.

This is when it can ‘go without me’.

Although, I also knew not to chase it and subsequently enter a new position because if I couldn’t grasp the entry point, how could I read the potential exit?

Throughout the parabolic rise, I knew to stay away and still I think there is risk Whitehaven’s stock price can pullback to the $4 range.

February 12, 2023

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending February 3, 2023)

A weekly Macro, Cross Asset review of prices trading at extremes which may generate future investment ideas and opportunities.

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

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

Chinese 10 year government bond yield

Australian Coking Coal 

Tin

Sugar

CSI 300

U.S. KBW Banking Index

Dow Jones Industrials

Nasdaq Composite and 100

Russell 2000

SOX

Overbought (RSI > 70)

German 2 year government bond yields

Cattle

CAC, DAX, MIB and IBEX equity indices

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

Orange Juice

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

Bloomberg Commodity Index

USD/BRL

Oversold (RSI < 30)

U.S. 5 year yield minus U.S. 3 month bill yield spread

Natural Gas

Urea (U.S. Gulf) 

Urea (Middle East)

Baltic Dry Index

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

None

Notes & Ideas:

It’s a very interesting list of entries featured amongst the ‘extremes’.

We are seeing the return on equity indices and some commodities back into the list.

Amongst bonds, yields generally fell, especially along at the long end. It’s worth watching the bearish outside weeks that bond yields had, which adds to their case of edging lower.

Those bearish outside weeks were seen amongst Spanish, German, French, Greek, Italian, Korean and Portuguese 10’s.

While yields fell globally, that wasn’t the case in U.S. debt. 

As bond yield work or meander their way lower (toward their longer term means), it would inversely suggest that ‘tech stocks’ will continue to rally.

While some ‘tech’ indices are hitting Overbought extremes this past week, keep in mind that prices often stay ‘Overbought’ for a longer time than they stay ‘Oversold’.

And for cross referencing, bond yields aren’t commensurately nor correspondingly registering Oversold readings.

Indices such as the Nasdaq 100 can do much more ‘damage’ by rallying further but don’t confuse momentum with value.

In commodities, energy prices resume/continue to fall along with precious metals. The latter would be a surprise to many. 

The Japan Korea LNG Marker (JKM) touched its lowest price since September 7th, 2021.

Natural Gas saw its 7th consecutive losing week and simultaneously touched Oversold extremes…..

JKM, Platinum, Dutch TTF Gas, Brent Crude and Rotterdam delivered Coal continue to edge their way lower towards their 200 week moving average.

Shipping Rates weakened further. The Baltic Dry Index is now Oversold and has slumped 81% in the past 5 weeks.

Following this week’s declines, last week’s Overbought Gold entries are no longer so.

While Orange Juice was the massive upwards mover for the week with current prices now suggesting a Sell signal for speculators and producers.

In currencies, the AUD was down 2% against everyone, everywhere.

In equities, we mainly saw U.S. indices pop into Overbought territory with some major Europeans also mimicking.

Although it is worthy to note that the Dow Jones Industrials fell 0.2% for the week, the Nasdaq Biotech Index declined 1% while Toronto’s TSX and the ASX 200 rose 0.2% and 0.9% respectively.

And last week, I prompted thought about the odds of an extended rally in Chinese equites. This past week, Chinese equity indices were the noticeable losers.

Lastly, this past week saw ‘outside bearish reversal weeks’ in Cocoa, Silver in USD, Gold in USD and in the AUD/USD.

The larger advancers over the past week comprised of;

Australian Coking Coal 9.8%, Hot Rolled Coil Steel 2.8%, Cattle 2.3%, Orange Juice 17.5%, Dutch TTF Gas 4.4%, AEX 1.8%, KBW Banking Index 2.2%, CAC 1.9%, DAX 2.2%, DJ Transports 7.2%, MIB 2%, IBEX 1.8%, Nasdaq Composite 3.3%, S&P MidCap 400 3.4%, Nasdaq 100 3.3%, Copenhagen 4.5%, Stockholm 4.4%, Russell 2000 3.9%, Sensex 2.6%, S&P SmallCap 600 5.2%, SOX 4.7%, S&P 500 1.6%, TAIEX 4.5%, FTSE 100 1.8% and Argentina’s MERVAL rose 5.1%.

The group of decliners included;

Aluminium (3.4%), Bloomberg Commodity Index (4.1%), Baltic Dry Index (8.1%), Cocoa (2.2%), China Coal (6.4%), WTI Crude (7.9%), Gasoil (12.7%), Copper (3.9%), Heating Oil (15%), JKM LNG (5%), Tin (4.4%), Natural Gas (15.4%), Platinum (3.6%), Gasoline (10.5%), Urea U.S. Gulf (4.1%), Brent Crude (7.3%), Silver AUD (2.7%), Silver (5.3%), Gold (3.2%), Gold in CAD (2.6%), Rice (3.1%), AUD/USD (2.6%), HSCEI (5%), HSI (4.5%), BOVESPA (3.4%) and Istanbul’s BIST fell 3.7%.

February 5, 2023

by Rob Zdravevski

rob@karriasset.com.au 

Wait for cheaper Corn (and Oil)

The price of Corn looks like going lower again.

My work suggests ‘new longs’ should be careful and wait for a decisive break higher and if so, it’ll be a momentum trade.

For producers needing cashflow, it’s prudent to lock in the current price $6.80 being offered.

For buyers, you should get some cheaper prices soon.

$5.80 comes to mind.

And something to ponder is how the price of Corn goes, so does Oil’s.

February 1, 2023

by Rob Zdravevski

rob@karriasset.com.au