rob zdravevski's blog

Sell AUD / Buy USD

If you’re a bit global and holding Australian Dollars,

selling AUD and Buying USD around its current price 0.6600 is something to consider.

As always, do consult your investment or family office advisor.

May 28, 2020
by Rob Zdravevski

Also Calling a Top in the S&P 500

May 27, 2020

by Rob Zdravevski

Following on from my posts about markets being at an acute point and yesterday’s note of calling a “top” on the ASX 200 at 5,780,

…..in Tuesday’s May 26, 2020 session (last night for us in Asia-Pacific), the S&P 500 also traded in a manner accordingly of a market “top”.

It’s intra-day high was 3,022 and closed at 2,992.

Keep in mind that a market top is not the confirmation of a new declining trend. That bit needs to come later.

For now, the S&P 500 “kissed” but didn’t close above its Weekly 50 day moving average (dma) and the same for its Daily 200 dma, all the while the Daily 100 dma crossed beneath the 200 dma 2 weeks ago.

This coincided with it trading 2 standard deviations above its Daily rolling mean.

Also, my trend indicators showed that the recent 8 day spurt was not done with strength nor with adequate volume.

Furthermore, the Banking, Transport and Russell 2000 traded in a manner and to certain levels which helped form this “top” call.

The 2 month rally was clearly performed within a medium term bear trend.

At various times there are things you own and things you rent.

The equity rally from the March 23rd, 2020 low was something you “rented”.

By the way, 94% of the rally from the March 23, 2020 low of 2,192 was seen in the first month.

For the next month (between April 29th until today, May 26, 2020) it see-sawed in a 7% range throwing many head fakes at either end. (see the chart in the headline banner)

Psychologically, equity markets tested the impatient, it drove the fundamental one-dimensional investor nuts and seemed to turn some into forced buyers.

For the most part, the rally hasn’t been about fundamentals. It has been about money flow, liquidity and behavioural science.

Ideas are one thing but execution is everything.

I’ll report back to tell you how the trades work out.

On other notes of interest;

• my call on a lower Gold price is intact and gradually confirming itself,
• many are “long” complacency…..should you buy insurance, particularly when you don’t think you need it ??
• Looking for lower AUD/USD once its done peppering 0.6658 (an overshot to 0.6710 plausible),
• Still bullish on Oil,
• I’m keeping a close eye on Copper (the bias is short as it still can’t break above $2.46),
• Bitcoin is acting like a leading correlation to the S&P 500,
• And I’m ploughing through various stock ideas

Until next time,

Rob

rob@karriasset.com.au

http://www.karriasset.com.au

Overall – Bullish on Oil

by Rob Zdravevski

May 25, 2020

 

Basic thesis is…

Petro-nations need petro-dollars,

they can’t live with a $30, nor $20 oil price,

my view is the March 6th Saudi and Russia stoush was a concerted effort to disarm U.S. shale supply,

main aim was to knock the U.S. off the perch of their temporary and “artificial” status of #1 oil producer,

that status was achieved on shale production,

it was a tactic (not only geo-political) but OPEC centric to dethrone a non-OPEC nation from being a net exporter

worldwide Oil Rig count has fallen at least 33% (see link)

also there is little to no new capex 

in turn, reserves been depleted in past years,

replacement discoveries are lagging,

then add a premium for rising geo-political tensions

Short Gold

For various reasons from my analysis……
I am calling the price of Gold lower.

The chart below is one analysis snippet sample showing you how the current rally has occurred with little and waning volume, unlike previous advances.

So the trade is……Short Gold around its current level of $1,717,
Stop Loss, at a monthly close above $1,805. (5% risk)

If it closes above this level, reverse the trade, Go Long and we’re off to the races !

Initial downward targets are;
$1,551
$1,478
$1,380 (19% reward)
and ultimate target $1,300. (24% reward)

Could possibly overshoot to $1,251 – $1,268 region.

Let me put this way…..I don’t want to own Gold at this price and this stage, whether its for a hedge, armageddon or any fundamental reason.

There are other better investment opportunities elsewhere as I feel a “long” Gold trade is a marginal trade, at best.

Note: these are my personal notes and just a digital record…..not personal advice to you..…see my disclaimer so you don’t get hurt and you don’t sue me.
Stay safe !

Buy a cheap plane, picking through Virgin’s scraps

A new Boeing 737-800 costs approx. US$82 million but you may be able to pick one up for 15 cents in the dollar.

Perhaps interested buyers could call the Sydney office of Deloittes (the administrators for Virgin Australia) and throw them a $12 million bid or lower?

p.s. it’s abut $200,000 for a new paint job.

Interestingly, in the 2019 Virgin Australia annual report they failed to tell us the amount of planes they operate, let alone list how many are owned or leased.

Although in the financials of the annual report you’ll also find morsels of info such as how they carry non-cancellable leases and on a more sadder note, approx. $200 million in employee long service leave provisions.

Though, I feel there is a chance that Virgin Australia’s livery will still be part of our aviation industry. It will be easier for an acquirer to run with the existing brand, slots, maintenance and broader infrastructure than to have a new carrier start from scratch.

https://lnkd.in/g2dFj98

https://lnkd.in/gFie8H8

#virgin #airlines #VAH #aircraft #leases

Weak results don’t matter

French Bank, Societe Generale (SocGen) reported its quarterly results,

Gross Operating Income fell from EUR 1.4bn to EUR 492 million,

EUR 820m is set aside for “cost of risk”,

The allowance or cost for these bad loan provisions have tripled from 21bps to 65 bps

Thus, it loses EUR 326m vs a profit EUR 640m in the same period last year,

Revenue falls 15% from the same period

Return on Equity is now – 0.50%

And interestingly price to book ratio is below 0.20

https://www.societegenerale.com/sites/default/files/press_release_q1-2020.pdf

https://www.spglobal.com/marketintelligence/en/news-insights/trending/ivf8udjj9cpzct1isejraa2

This market has nothing to do with economic reality and nothing to do with valuation reality. 

It’s a macro market, its a liquidity market and a money flow market.

This is the type of market and economic environment where companies are either or will;

go under;

need a bailout;

need to raise capital;

amble along or;

were strong going in and become stronger coming out

I know which “bucket” of companies I want to own and I’d be willing to pay a premium to own them.
This is a market which separates the well financed from the over-leveraged.

You want to own companies with a ‘fortress’ balance sheet and who is a ‘Gorilla’ in its market or industry.

https://mises.org/library/trouble-prosperity-interview-james-grant

https://themarket.ch/english/covid-19-unmasked-an-essential-weakness-in-finance-ld.1804

April 30, 2020

by Rob Zdravevski

rob@karriasset.com.au