rob zdravevski's blog

Concentration not Diversity

It may have been missed by readers in last week’e edition on Macro Extremes…….

but the ASX 200 equity index is at its most overbought reading since July 2019.

* on a mid-term, weekly basis

Today, the ASX 200 is trading at 7,296.

This may portend a decline in the index, however one of my predictions for the coming year or so, is that Index Huggers, ETF investors and even portfolios holding a large number of securities may be quite disappointed with their performance.

In other words, the index may oscillate in an uninspiring fashion and not reflect the ‘gems’ or winners found within.

I think there will be rotation of monies within sectors providing attractive investing opportunities but the index won’t necessarily paint that picture.

July 2, 2021

by Rob Zdravevski

rob@karriasset.com.au

It may have been missed by readers in last week’e edition on Macro Extremes…….

but the ASX 200 equity index is at its most overbought reading since July 2019.

* on a mid-term, weekly basis

Today, the ASX 200 is trading at 7,296.

This may portend a decline in the index, however one of my predictions for the coming year or so, is that Index Huggers, ETF investors and even portfolios holding a large number of securities may be quite disappointed with their performance.

In other words, the index may oscillate in an uninspiring fashion and not reflect the ‘gems’ or winners found within.

I think there will be rotation of monies within sectors providing attractive investing opportunities but the index won’t necessarily paint that picture.

July 2, 2021

by Rob Zdravevski

rob@karriasset.com.au

Owning a Russian Bank is less riskier than Sydney real estate

Today, I’m selling shares in TCS Group.

It’s a Russian Bank (3rd largest by customers) and financial services company.

I bought the shares (which are traded in London, priced in USD) at the $21 mark, 1 years and 3 days ago.

Today, they’re $87 per share.

A quadrupling return at any time, let alone within 12 months is simply extraordinary. It doesn’t happen often.

They were trading at a P/E of 5 back then and now I feel they are fully valued, especially as I think the share price has capitalised perhaps 3 years of earnings so quickly.

This is why I am so interested in the hunt of picking stocks in global equities markets.

While the fervour of residential real estate continues, I haven’t seen a Sydney house price quadruple in the past year.

<insert catty swipe>

Some may suggest that buying shares in a Russian Bank is a different risk profile than a residential property.

I’ll argue differently.

I think buying a residential property in one particular city, in one specific street, with a ‘north’ facing living room window and a net rental yield of 2% (which is a P/E of 50) with little chance to improve its (operating) revenue and limited ability to lower the fixed and maintenance costs…..is riskier.

July 1, 2021

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending June 25, 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)

Live Cattle

Natural Gas

Overbought (RSI > 70)

Tin (for the 9th week)

Gasoil

Heating Oil

WTI Crude Oil

Brent Crude Oil

Iron Ore

Hot Rolled Coil Steel

the CRB (commodities) index

France’s CAC-40 equity index (for the 11th consecutive week)

Korea’s KOSPI equity index

Switzerland’s SMI equity index (for the 2nd week)

and the Oslo and Helsinki equity indices.



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

U.S. 2 Year Treasury Note yield

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)

Chinese 10 Year Government Bond Yields

Platinum

AUD/USD (for the 2nd consecutive week)

NZD/USD 

Nikkei 225 equity index

Oversold (RSI < 30)

Nil

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

Nil

Notes & Ideas:

The list of extreme readings continues to diminish as trend change direction and mean reversions take place.

It’s time time prepare for the extremes seen, most likely at the other end of the recent ranges.

Again….the larger price moves in global markets were seen in the commodity markets.

For the week…..

Lumber (8%)

Wheat (4%)

Leans Hogs fell 6%, following on from last week’s 11% decline.

Corn (8%)

Coffee + 4%

Platinum + 6%

Oil +4%

Russell 2000 and Midcap 400 (U.S.) equity indices rose 4%

and the ASX 200’s 1% decline for the week sees it move below (and out of) overbought territory.

The U.S. 10 year bond yield it yet to break above 1.75%, although Yields rose to 1.53%, up from last week’s 1.44%. This is the thing to watch. Hell may break loose if the 10’s break above 1.65%.

The Baltic Dry (shipping) index consolidated the 29% rise seen over the past weeks with a meandering 1% effort this week. 

Cryptocurrencies has a negative week across the board.

During the week, Bitcoin fell 6%, Ethereum tanked 17% (compounding the previous week’s11% swoon), Litecoin slumped 17% (adding to last week’s 9% drop) and Ripple declined 20%, amplifying last week’s 12% slump.

Incidentally, no cryptocurrencies are Oversold yet.

And lastly, Bitcoin is trading 149% above its 200 Week Moving Average, which is lower from last week’s 158% reading and certainly lower when compared to its 466% peak in mid-April 2021.

June 27, 2021

by Rob Zdravevski

rob@karriasset.com.au

2nd chance to buy Hot Rolled Coil Steel

Don’t you wish your next BBQ investing ‘tip’ was to buy Hot Rolled Coil Steel futures ??

Check out the parabolic price move in Hot Rolled Coil (HRC) Steel.

Prices have quadrupled since August 2020.

That’s more than Bitcoin, shares in Tesla & Afterpay and definitely more than Sydney real estate.

At these extremes, coupled with a bunch of other metrics and observations, I’m looking a pullback in the price to the $1,080 – $1,210 mark, which is an approx. 30% decline from its current $1,658.

The elevated price of HRC is a little different and more so deserved when compared to my past parabolic commentary in Corn, Soybeans, Tesla, Bitcoin, Lumber or Copper which involves replenishing supply, diminishing re-investment, overvaluation or a mania…..

as HRC is a ‘worked’ product resulting inputs and manufacture but is also a beneficiary of strong demand, tightening supply and capacity constraints.

Should HRC decline, I’ll watch for investing opportunities in the shares of companies such as Angang Steel, Bluescope Steel, Arcelor Mittal and U.S. Steel.

June 23, 2021

by Rob Zdravevski

rob@karriasset.com.au