Extraordinary returns in 8 days

From their closing prices on Friday October 30th, 2020 (in only 8 trading days), this list of selected equity indices, commodities and currencies have produced the following returns.

Spain’s IBEX 20%
France’s CAC 20%
Italy’s MIB + 16.2%
KBW (U.S.) Bank Index 15.8%
Germany’s DAX 14%
The U.K.’s FTSE 13%
Russell 200 (small cap) 12.9%
Russia’s MOEX 12.8%
MidCap 400 11%
Singapore’s Strait Times 11%
Japan’s Nikkei 10.1%
Hong Kong’s Hang Seng 9%
DJ Transports 8.9%
Australia’s ASX 200 + 8.8%
India’s Nifty 50 8.6%
S&P 500 8.4%
HSCEI 8.3%
Korea’s Kospi 8.2%
Nasdaq 6%
Shanghai Composite 3.8%

Gold in USD 0.2%
Gold in AUD (3.7%)

Lumber 17%
Heating Oil 16.7%
Brent Crude Oil 16.2%
Corn 7%
Iron Ore 5.2%
Platinum 5%

UK 10 Year (10’s) Government Bond Yield +52%
Australian 10’s yield +19%
Canadian 10’s +16.7%
U.S. 10’s +12%

and currencies;
AUD 3.8%
NZD 4%
Bitcoin + 13.6%

November 11, 2020
by Rob Zdravevski
rob@karriasset.com.au

This is an outsized streak

For ASX 200 index watchers, I produced the image below at the mid-point of todays trading session.

The index has since risen a further 0.3% (to 6,442) but overall, the ‘fat part’ of the trade has been seen.

You are now looking at an index which has risen 8.7% over 8 consecutive days. A time streak not seen since mid February 2018 and October 2017.

P.S. most rising streaks lose steam on their fifth day.

In those previous 8-9 day rising streaks, the ASX rose 4.5% & 4.8% respectively.

Coincidentally, the ASX 200 is now 2 standard deviations above its daily mean.

And as the commentary in the chart mentions, there are ‘gaps’ to fill.

Market timing does matter and it’s important to observe when the pendulum is at the height of its arc.

Psychologically, I ask 3 questions to those chasing this market higher today.

a) how much more gain are you trying to squeeze out following such an abnormal run?

b) have you quantified how much risk you are taking for this ‘extra’ gain?

c) what is the probability of this daily streak continuing tomorrow?

November 11, 2020
by Rob Zdravevski
rob@karriasset.com.au

More colour to the latest moves

The link below is today’s newsletter with added commentary about the recent market machinations.

https://mailchi.mp/karriasset/wicked-markets-carry-surprises

A fun day for trading nerds

Monday’s action in global capital markets was one of those fascinating trading days which occur a handful of times in a given year.

Silver fell 7.6%,
Gold declined 4.5%,
Oil rose 6%,
The S&P 500 climbed 3.9% and then gave up gains to close up 1.2%,
The Nasdaq was up 1.5% at its highest point and then reversed (not good) to close DOWN 2.1%,
Pfizer had good news about a vaccine so it soared 15.4% but ending the day up 7.7%,
its peer, Merck advanced 6% (in sympathy) to only retreat and close unchanged,
the KBW Bank Index rose 13.5% (an amazing move for an index),
and a couple U.S. bank stocks held in client portfolios surged 18% (and I’m not happy ’cause it shouldn’t be doing this),
U.S. 10 year bond yields screamed 14% higher moving from 0.81% to 0.93%,
in the previous day trade (Friday), they had already increased 7% (from 0.76% to 0.81%)

while Spain’s unloved IBEX and the FTSE 100 respectively added 8.5% and 4.5% in a single day.

These indices have risen 15.6% and 11% since being mentioned in my recent newsletter.

So, it was a day of “reversals”, “gap-ups” and momentum chasing while it has been a few days where some unnatural owners and participants have set themselves up to be hurt and some became spooked.

November 10, 2020
by Rob Zdravevski
rob@karriasset.com.au

Industry Super Funds – Lenders of First Resort

There is a growing trend in the Australian superannuation industry landscape.

We’ve seen large super funds investing in infrastructure (tollroads, airports), agriculture (avocados), pastoral enterprises and finance property development.

Now, behemoths such as AustralianSuper are ‘lending to’ or underwrite the acquisition of businesses and assets in receivership.

One recent example is AustralianSuper’s partnering with resources private equity fund, RCF in a distressed lithium ‘play’.

Surely, these mega funds will be courted increasingly because if you think Private Equity is regarded as ‘patient capital’, then quadruple that timeline and you’ll resemble a large industry pension fund.

The larger topic is to see Industry Super Funds become a mainstream lender to business, ultimately unlocking a nearly $3 trillion pile of money.

This has been discussed for a couple years.

Perhaps Super Funds can provide a banking lending service?

November 8, 2020
by Rob Zdravevski
rob@karriasset.com.au

https://www.afr.com/street-talk/aussuper-piles-into-230m-pilbara-deal-to-buy-altura-20201028-p569b3

https://www.afr.com/wealth/superannuation/industry-super-funds-ready-to-lend-to-business-20180902-h14u7u

A year’s worth of return within a week…..

Wow ! What to do ?

In 4 trading days (since Friday’s October 30th close) the S&P 500, Russell 2000 and MidCap 400 have risen 7.5%.

The Nasdaq 100 has soared 9.2%.

A year’s worth of return within a week…..

We are only 5 days into the month and I sense fund managers being concerned about underperforming their benchmarks.

Indeed, markets tend to move where they can do the most damage….and going up is also damaging, especially if you are not invested.

#momentum#FOMO

November 6, 2020
by Rob Zdravevski
rob@karriasset.com.au

Bitcoin is silently screaming

A month ago, I wrote the post linked below, the currencies mentioned have held their supports as did Bitcoin.

Since then, Bitcoin has advanced 40% in the past 30 days.

https://robzdravevski.com/2020/10/05/short-term-aud-fx-range/

November 5, 2020
by Rob Zdravevski
rob@karriasset.com.au

Bullish on banks, because…

My reasons for turning bullish on bank stocks include:

a) I expect longer dated interest rates to rise (reminding me of the 3-6-3 rule, pay 3% on the deposits, lend money out at 6% and be on the golf course by 3pm)

b) this means their net interest margins should increase

c) banks have taken their medicine and paid their fines for past indiscretions (it’s not new news)

d) banks have already made extraordinary provisions for COVID-19

e) in turn, I expect them to revise and lower these provisions to account for the quicker than expected business recovery.

November 5, 2020
By Rob Zdravevski
rob@karriasset.com.au

Following the paper trail

The links below follow my time series of posts about a Lumber trade which commenced in July 2020….

Today’s chart below shows Lumber halving from its recent high, to come back and say ‘hello’ to its 200 day moving average.

Some points which come to mind are:
a) catching the fat part of the trade is good enough,
b) it’s OK for prices to go higher without you being on board,
c) many times it’s knowing when not to be in a trade (when the reward doesn’t outweigh the risk being taken),
d) mean reversion eventually happens.

Previous Lumber blog posts, in chronological order;

1) https://lnkd.in/gakxCyx

2) https://lnkd.in/gW9kyYp

3) https://lnkd.in/gnvK8tH

November 2, 2020
by Rob Zdravevski
rob @karriasset.com.au

It’s not a capital raise, it’s a sale offer

As the IPO market heats up, so does the shenanigans of the offer details.

Cleanspace’s (CSX.AX) recent prospectus has a sense of artfulness.

The company ‘offered’ $131 million, of which $111 million is sent to ‘existing shareholders’. (see: use demand from IPO subscribers to soak up the selling).

This only leaves $20 million for corporate use.

But the brokers promoting the IPO receive $5 million and a further $5 million is being used to pay back a loan. Deduct a few more professional services fees and the IPO hasn’t really raised much at all for the company’s operating purposes.

And ‘existing shareholders’ with remaining holdings entered into a ‘voluntary escrow’, which is quite standard although hardly a commitment when 25% of the shares are able to hit the market in 4 months time and another 44% of the escrowed stock free up 10 months from now (August 2021), which will likely be before the 2021 full year results are released.

(the FY20 annual report was signed off August 27, 2020)

I may ask what is wrong with the picture?
and suggest to read your prospectuses !

For now, all seems to be fine 🤷🏻‍♂️

With an IPO price of $4.41, CSX traded to a high of $7.44 on its public debut.

November 2, 2020
by Rob Zdravevski
rob@karriasset.com.au

%d bloggers like this: