rob zdravevski's blog

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

Macro Extremes (week ending April 2, 2021)

This week’s list has shortened suggesting that many assets breaching ‘extremes’ have since eased to resume trading within a normal range’.

And so, during the past week, the following assets (on a weekly timeframe) registered an Overbought reading or traded more than 2.5 standard deviations below its rolling mean

.

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

<None>

Overbought (RSI > 70)

Canadian 10 year bond yields (for 7th consecutive week)

Korean 10 year bond yields

U.S. Government 5 & 10 year bond yields (for 7th consecutive week)

Aluminium (for 6th consecutive week)

Lean Hogs (for the 7th consecutive week and its highest price since October 2014)

Corn (for the 16th consecutive week & trading 46% above its 200 Week Moving Average)

AUD/JPY (an important risk indicating currency)

USD/TRY (Turkish Lira)

USD/DKK (a weaker Danish Krone makes your Vestas wind turbines, Lurpak butter & LEGO cheaper)

U.S. KBW Banking Index (5th consecutive week)

Nasdaq Transportation Index  (4th consecutive week)

Dow Jones Transport Index

S&P Mid Cap 400 (4th consecutive week)

Sweden’s OMX 30 Index (4th consecutive week)

Bitcoin, Ethereum & Monero

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

USD/HKD

USD/JPY

(in both cases, suggesting the USD is strong versus the weakness of the opposing currencies)

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;

EUR/GBP

EUR/USD 

(meaning a weak EUR suggests selling British Pounds or U.S. Dollars in order to accumulate Euro)

Cocoa

Notes & Ideas:

Last week’s edition was laden with commentary and ideas still worthy of noting and digesting.

Assets such as Tin & Copper have pulled back from recent loftiness, thus t’s worthy to highlight the streaks in this weeks list  where the ‘extremes’ seem to be extended, such as….Transports, Banking, Aluminium, U.S. MidCaps, Canadian and American Government bond yields & Lean Hogs.

I am paying too much for bacon !

Some other macro ideas are;

Buy U.S. 5 & 10 Year Bonds (expecting prices to rise and yields to fall)

Sell USD / Buy Yen (there are some interesting Japanese equity ideas in my equities universe)

I think the Mid-Cap 400 and , U.S.  banks & Transports are next to pullback.

That 2 year and 10 year bond yield spread has fallen from 1.59% to 1.51% 

And, Bitcoin continues to trade at 430% above its 200 Weekly Moving Average.

April 4, 2021

by Rob Zdravevski

rob@karriasset.com.au

A taste of the week ahead

A taste of capital market observations and trades I may position for;

EUR/GBP is nearly Oversold,
should occur in the coming weeks, near 0.8512 level, then selling British Pounds and Buying Euro’s would be the trade.

Looking for leg lower in Natural Gas.

Oil has seen a healthy mean reversion, maintaining bullish stance.
$58.80 in Brent means adding to Long’s.

Short in the Semiconductor Index (SOX) makes for market hedge?

Shorting Corn and/or Soybeans

The Gold Volatility Index is close to Oversold. If the RSI touches 30, probability of Gold rally increases. Been accumulating gold related securities for 6 weeks.

Although watch the price action in Silver.
Silver’s trend is bearish.

Looking to re-enter the Long Platinum trade at lower prices.

I see risk in Iron Ore (62% Fe, CFR China) prices to $125 and $118. Its currently trading at $167

ASX 200 poised to break ‘hard’ either way, with odds suggesting higher prices, but let’s wait for the break.

Although some major equity indices made higher weekly closing highs, some made made lower highs and lower lows.

French 10 Year bond yields negative since June 2020.

German 10 bonds have been negative since April 2019

March 28, 2021
by Rob Zdravevski
rob@karriasset.com.au

Macro Extremes (week ending March 26, 2021)

During the past week, the following assets (on a weekly timeframe) registered an Overbought reading or traded more than 2.5 standard deviations below its rolling mean.

No assets (securities) in my immediate universe 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.

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

USD/TRY, meaning the Turkish Lira weakened notably.

Overbought (RSI > 70)

Canadian 10 year bond yields

U.S. Government 5 & 10 year bond yields (for 6th consecutive week)

Aluminium (for 5th consecutive week)

Lean Hogs (reaching their highest price since October 2014)

Copper (and on a longer-term ‘Monthly’ basis, it’s at most overbought since September 2006)

Corn

Soybeans

USD / JPY

U.S. KBW Banking Index (4th consecutive week)

Nasdaq Transportation Index

S&P Mid Cap 400 (3rd consecutive week)

Sweden’s OMX 30 Index

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

Dow Jones Transport Index

Notes & Ideas:

There are many trade ideas to extract from the list such as an expected mean reversion in Aluminium, Copper and Pork prices which would benefit product manufacturers as falling prices would improve their margin (lowering ‘input’ costs) while Aluminium producers, Copper miners and Pig farmers should lock in their gains as prices are hitting extended peaks.

Weekly readers would’ve noticed Corn and Soybeans have also been in the ‘extreme high’s’ list for the past few weeks.

A decline and mean reversion in Corn would be welcomed news for cereal makers such as Kellogg.

Lower soybean prices means poultry farmers get to buy cheaper soybean meal, of which their industry consumes 60% of it, as feed.

Some other macro ideas are;

Buy U.S. 5 & 10 Year Bonds (expecting prices to rise and yields to fall)

Sell USD / Buy Yen (there are some interesting Japanese equity ideas in my equities universe)

Specific stock and other ideas are being sent to clients over the weekend.

Many of the recently ‘Overbought’ bonds, commodities, currencies and equity indices have now eased away from those extremes readings.

The Russell 2000 was hitting such extremes 2 weeks ago and has since declined 5%. 

I think the Mid-Cap 400 and , U.S.  banks & Transports are next to pullback.

Tin, the Nikkei 225, the CRB Index, AUD/JPY have also fallen from those Overbought levels.

Wheat has declined 10% and Natural Gas more so, since their “quinella’ readings 6 weeks ago.

And most notably, Australian, UK & Korean bond yields have fallen 5%-10% for the week.

The spread between the 2 year and 10 year bond yield continues to widen, now sitting at 1.53%, something not seen since September, 2015.

Although the bigger macro story is not the ’steepening’ of the yield curve, it is more so that 10 Year bond yields have Quadrupled in the past 12 months, as described in a recent thesis.

The crowded trade is to Short 10 year Government Bonds. I like the opposite with my preference being to Buy the 5 Year bond.

And, Bitcoin is trading at 428% above its 200 Weekly Moving Average, down from last week’s 448% reading.

March 28, 2021

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending March 19, 2021)

At some time during the past week, the following assets (on a weekly timeframe) registered either Overbought, Oversold or traded more than 2.5 standard deviations either side of its rolling mean.

There are no assets (securities) in my immediate universe which are either Oversold (where the RSI is < 30) and/or trading at least 2.5 standard deviations below its mean.

Everything else in my list is in the “Overbought” territory

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

USD/JPY (The Yen is weak relative to the U.S. Dollar)

Dow Jones Industrial Average (the ‘most’ since September 2018)

Overbought (RSI > 70)

AUD / JPY (for the 3rd consecutive week)

Swedish, British, New Zealand and Australian 10 year bond yields 

the CRB Index and the Bloomberg Commodity Index (for the 7th consecutive week)

Copper (for the 6th consecutive week)

Tin

Lean Hogs

Corn

Soybeans

Nikkei 225

S&P MidCap 400 (2nd consecutive week)

U.S. KBW Banking Index (3rd consecutive week)

Dow Jones Transport Index (again)

Stockholm OMX 30 Index (Volvo, Assa Abloy and Electrolux have big weeks)

Bitcoin & Ethereum

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

Korean 10 year bond yields

Canadian 10 year bond yields

U.S. 5 & 10 year bond yields (i.e. bonds are being sold heavily, thus inversely yields are rising)

Aluminium

Notes & Ideas:

The spread between the 2 year and 10 year bond yield continues to widen, now sitting at 1.52%, something not seen since September, 2015.

Although the bigger macro story is not the ’steepening’ of the yield curve, it is more so that 10 Year bond yields have Quadrupled in the past 12 months, as described in a recent thesis.

The crowded trade is being Short 10 year Government Bonds. I like the opposite. 

Specifically, Buying the 5 Year Bond, meaning I think the yields will fall from its current 0.87% back to 0.54%.

Korean and Canadian bond yields have been overbought for 4 consecutive weeks and the U.S. 5’s and 10’s overbought streak is now at 6 weeks.

The previously unloved “long Gold” trade has garnered some popularity as Gold (in USD) held US$1,677 and risen 4% to US$1,740;

while AUD Gold bounced 3% from its A$2,189 low.

Inversely, over the past week, Crude Oil corrected its overbought ‘extreme’ by falling 11% at its lowest level. Brent never managed to close the week above $70, in order to allow it to entertain the $74, $76 and $82 region. 

Accordingly, downward moves in Crude, Heating Oil and Gasoil resemble a reversion to the mean.

France’s CAC-40 and Germany’s DAX are approx. 2.5% away from recording ‘extreme’ readings.

China’s Shanghai Composite has seen its lowest weekly close since December 14, 2020.

The weak Yen encourages buying, especially using your Strong USD or AUD. 

p,s, there are some interesting Japanese stocks in my equities universe.

And, Bitcoin is only trading at 443% above its 200 Weekly Moving Average, down from last week’s 500% stretch.

March 21, 2021

by Rob Zdravevski

rob@karriasset.com.au