rob zdravevski's blog

German buy target approaching

Germany’s economy is the world’s 4th largest economy.

It is somewhat ahead of the United Kingdom, India, France, South Korea and Canada.

Its publicly traded equity index is nearing a low that I have been waiting for.

The DAX priced at 12,350 makes for an attractive entry point.

That price is approximately 3.3% below the current level of 12,766 points.

Although, be prepared to alter your view to 12,600 being equally fine.

Some may ponder buying an ETF which tracks the DAX Index;

others may look to allocate monies to money managers concentrating on that market;

and some may circle the opportunity of accumulating shares in Siemens, SAP, Fuchs or Mercedes.

Germany is joining Taiwan and South Korea to my growing list of ‘country’ buy ideas.

July 12, 2022

by Rob Zdravevski

rob@karriasset.com.au

Newmont Mining keeps getting cheaper

In this series of posts in April 2022, (when the stock was $84) I wrote that I expected Newmont Mining to decline tot he $64-$68 region and made mention of its 200 week moving average.

Newmont price to ease

Newmont nears target buying range

I haven’t bought any Newmont yet.

The decline to my $64 price target was seen well within my 9 month timeframe and it has since barrelled down to $58 in the past few weeks.

Whilst the $58 region does provides some support, $52.70 – $53.00 is a wonderful price to accumulate Newmont shares.

That price will coincide with my work that suggests Gold (in USD) falls a further 4.5% or so, to the US$1,660 – $1,670 mark.

July 12, 2022

by Rob Zdravevski

rob@karriasset.com.au

Be careful what you wish for

Inflation continues to be a politically induced phenomenon.

The U.S. currently has an approximate 25% tariff on $300 billion worth of goods from China.

and Australia doesn’t seem to know how to treat its customers.

Yet, the politicians either blame the central banks or appoint them the ogre to fix it.

Perhaps the western governments should stop practising protectionism, nationalism and xenophobia in order to scare the voting constituency into re-electing them.

Globalisation provided many economies with lower prices.

Be careful what you wish for.

p.s. global diplomacy and trade rhetoric is currently at kindergarten level.

July 12, 2022
by Rob Zdravevski
rob@karriasset.com.au

Divergence in the Aussie gold producers

Over the past year, the stock prices of Australian gold mining producers have diverged from gold as priced in AUD.

The chart below shows ASX listed Northern Star (NST) laid over the AUD gold price.

(NST appears in blue)

Whilst a company’s gold reserves and resource along with their ‘all-in sustaining costs’ (AISC) are a couple metrics to include in your analysis, keep in mind that Gold isn’t perishable, nor does it replenish such as wheat.

Furthermore, a gold miner can also choose to ‘leave the gold in the ground’, rather than incur rising costs of extraction.

And, on a U.S. Dollar basis, these companies are even cheaper, the further the Australian Dollar declines.

July 12, 2022

by Rob Zdravevski

rob@karriasset.com.au

A new wave of retail take-unders

I like the look of this deal.

The world’s largest duty-free shopping group, Dufry is buying Autogrill (one of the world’s largest owner and provider of airport concession and motorway catering services)

And the deal is akin to buying straw hats in winter…..considering that travel numbers are yet to recover, higher fuel prices are set to crimp motoring holidays and airport malaise continue.

These two companies know about the business of retail while you are in transit.

Once upon a time, Autogrill created a business called World Duty Free. After they de-merged it and floated it on Borsa Italia in 2013, Dufry acquired it a couple years later.

The Benneton family own 50.3% of Autogrill and they are happy sellers in exchange of Dufry shares and board representation. If you are not involved in a high-flying sector such as technology, this is a very good way for a 50.3% shareholder to find a happy home for their holding.

Sadly, the price offered to every other Autogrill shareholder is 8% below the prior day’s close of EUR 6.85.

Overall, Dufry has done well to to announce a take-under, rather than a takeover.

Although it seems challenging for a $3 billion market cap Dufry to swallow $2.6 billion Autogrill, it is a part stock and cash deal.

I’ll wait a few months for the deal to close and the merger to digest and check back if Dufry shares are cheaper than their current CHF 33.00 price.

July 11, 2022

by Rob Zdravevski

rob@kariasset.com.au

https://www.bloomberg.com/news/articles/2022-07-10/duty-free-giant-dufry-agrees-to-buy-autogrill-from-benettons?sref=qLOW1ygh

Macro Extremes (week ending July 8, 2022)

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)

Dutch TTF Gas

Overbought (RSI > 70)

Canadian 10 year government bond yield

U.S. 2 year government bond yields 

U.S. Dollar Index

Istanbul’s BIST Index

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

None

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

Copper/Gold Ratio

Bloomberg Commodity Index

Gold

Corn

Oats

Soybeans

Wheat

Germany’s DAX Index



Oversold (RSI < 30)

Hot Rolled Coiled Steel

Tin

EUR/USD

GBP/USD

INR/USD

JPY/USD (for the 17th consecutive week)

TRY/USD

IDR/USD

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

Copper (and 200 WMA)

South Korea’s KOSPI equity index

Taiwan’s TAEIX equity index

Chilean Peso / U.S. Dollar (3rd consecutive week)

DKK/USD

SEK.USD

Notes & Ideas:

This week’s biggest news was pullback in selected commodity prices and the advance in many developed market equity indices. 

In an earlier post, I question ‘what if the lows have already been seen”?

In other news, it was a busy week for currencies,

The Euro made new lows.

The Korean Won is not oversold this week.

The AUD/USD made a lower low and its something to watch. Last week’s Macro Extremes talked about a break below 0.6830 opens up probability to wards 0.6570.

The Russian Ruble rose 28% for the week against the U.S. Dollar.

The South African Rand continues its weakness and is nearing a Weekly Oversold reading.

The Danish Krone is cheap, but I’d like to see the OMXC25 (Copenhagen) Index fall a further 12% and then I’ll look at Carlsberg, Vestas Wind Systems or Maersk.

The U.S. yield curve inverted again…..more on that in a seperate note.

Some of the stubborn ‘hold-outs’ in the energy complex fell for the week except for those which have been bludgeoned lately such the Natural Gas price, which following a 4% dip on Friday alone, still managed to produce a weekly gain of 5%….albeit recovering part of last week’s 8% fall.

And the Dutch TTF Gas price rose 19% for the week, as the market is watching if Russia proceeds with its 10 day closure of the NordStream 1 Pipeline, commencing Monday July 11, 2022.

Incidentally, Dutch TTF has soared 86% over the past 4 weeks.

While Lumber rose 5% adding to the previous week gain of 15%. I’ll wait for a lower price, is in the meantime, it can go without me.

Over the past 2 weeks, Gasoline and Gasoil (diesel) has fallen 13%, Heating Oil declined 17%, Australian Coal prices have tanked 35%, the Baltic Dry Index swooned 12% and Tin eased 10%.

The crowd all expect energy prices to rise.

What if they halve as we head into the Northern Hemisphere winter?

I still have a developing view that Coffee will decline notably. It’s fallen 10% since I raised this thought a couple weeks ago and I’m musing that it may ease a further 60%. That will look good for Nestle or Starbucks….

Speaking of predicting declines, the CRB Index has sunk 12% recently and I still think it has 33% more to go, towards its long term mean reversion.

The weakness in Gold and Silver in both USD and AUD was also noticed.

In another set of pondering, what would the consensus view for the commodity cycle look like, should that occur?

Lows are ‘nearly there’ in Australian Coal, Aluminium , Iron Ore prices with the later falling below its 200 week moving average. 

In equity indices the Italy’s MIB, Brazil’s Bovespa, the S&P MidCap 400 and S&P 600 SmallCap are also approaching Oversold.

I’m still expecting a ‘double dip’ in some indices but I’m not categorising anything resembling a crescendo or capitulation. It’s just price action.

I’ll watch for a low in the Dow Jones Industrials of 29,440, the DJ transports at 12,130 and the S&P 500 to visit 3,333 – 3,322.

The larger advancers over the past week comprised of; 

Rotterdam Coal 5.4%, DXY 1.7%, Hogs 3%, Lumber 5.6%, LNG 6.4%, Natural Gas 5.3%, Palladium 11.3%, Sugar 5.3%, Dutch TTF Gas 18.6%, Corn 22%, Wheat 5.4%, AUD/EUR 3%, AEX 2.8%, CAC 1.7%, DAX 1.6%, MIB 2%, KOSPI 2%, Nasdaq 100 4.7%, Nikkei 2.2%, Sensex 3%, Oslo 2%, Copenhagen 3.3%, Helsinki 2%, Stockholm 5.1%, Russell 2000 2.4%, SMI 2.3%, SOX 6.5%, SPX 2%, ASX 200 2.1%, Biotech Index 5.4%, Nasdaq Composite 4.6%.

The group of decliners included;

Australian Coal (12.5%), Baltic Dry Index (6.6%), China Coal (2.5%), WTI Crude (3.4%), Gasoil (7.6%), Gold (3.3%), Copper (2.3%), Heating Oil (6.8%), Coffee (1.9%), Tin (3.5%), Orange Juice (3.2%), Gasoline (6.5%), Silver (2.2%), Cotton (2.6%), Brent Crude (3.9%), Uranium (2.8%), Silver AUD (3.3%), Silver USD (2.8%), Gold AUD (4.2%), Gold USD (3.8%), Oats (2.4%0 and EUR/USD (2.4%).

July 10, 2022

by Rob Zdravevski

rob@karriasset.com.au  

What if the lows are already in?

The lows in some stocks may have been seen in late April and throughout May 2022.

In early to mid June, I wrote about Buy signals appearing in various equity indices.

And while, ‘double dips’ and re-test of recent lows is more than possible……

I’ve always had a tendency to being early, rather than late.

The latter is similar to chasing a bus after it has left the stop.

If that happens, don’t move ‘heaven and earth’ to catch up to it at the next couple stops.

Just wait for the next bus.

Although by being early, you can start to think that the bus isn’t coming or perhaps it ran early and left before you got to the bus stop or worse, the service has been cancelled.

When it comes to some markets, the S&P 500 is now 7% above its June 13th, 2022 intraday low while the Nasdaq biotechnology index has risen 21% since that same week.

Stocks such as Wesfarmers, Amazon and James Hardie have risen 12%, 16% and 23% respectively from their June 13th lows.

July 8, 2022

by Rob Zdravevski

rob@karriasset.com.au

Copper mean reversion is complete

Copper completed a mean reversion I have been calling for the past 8 months.

It spent the majority of that time meandering around $4.50 and from a recent high of $5.00, it has fallen to my target price of $3.42 to satisfy my trifecta of a mean reversion to its 200 week moving average, registering a weekly oversold reading on its weekly RSI and trading to 2.5 standard deviations below its weekly mean.

As written in this weeks ‘Macro Extreme’s’ post, it is now giving us a Buy signal.

Although, markets and prices remain wicked and daily trading is not for the faint-hearted.

For example, in only the past 2 days, from $3.42, Copper traded down 4% to a low of $3.28 and reversed higher some 9% up to $3.58, to now be trading down 2% below that level at $3.53, at the time of writing.

Daily noise and headfakes can be dangerous.

Remember all that hubbub about copper shortages and electrifying the world including transportation?

Albeit that theme has legs and remains intact, investors can overpay for an asset, security or theme steeped in momentum and swallowed by the herds instincts, especially when euphoria is on the rise or near its peak.

See lithium, nickel, natural gas, tech stocks, aluminium, wheat, buy-now-pay-later IPO’s, etc etc.

July 8, 2022

by Rob Zdravevski

rob@karriasset.com.au