For the contrarians, fund manager’s are bearish

This week’s Bank of America survey highlights include,

Fund managers are “super bearish” with average allocations to cash at the highest since 2001, with 62% being overweight cash;

A net 42% of global investors are underweight European equities, the largest such position on record;

A historically high 52% of respondents said they are underweight equities;

Of the polled 212 investors overseeing $616 billion in assets from Sept. 2-8, said 72% of those surveyed said they expected a weaker economy next year, and the most crowded trade was long U.S. dollar.

https://www.bloomberg.com/news/articles/2022-09-13/bofa-survey-shows-nadir-in-stock-allocations-amid-recession-fear?sref=qLOW1ygh

September 14, 2022

Presentation – Being A Contrarian

I’m sharing a presentation which I spoke to this week.

The topic is contrarianism where I show long-term charts (on a weekly basis) and quantified extreme moments using three measures, being:

– the 200 week moving average

– the Relative Strength Indicator (signalling Overbought and Oversold readings) and 

– Bollinger Bands showing when prices traded to 2.5 standard deviations (either above or below its rolling weekly mean)

I attempted to highlight the case for lower interest rates and inflation (as they are themselves trading at ‘extreme’ levels) by showing a host of correlations and I believe moderation is aided with further mean reversions amongst various prices, while many other commodities have already done so. As reported inflation figures lag, lower readings are expected to appear in the coming 4-10 months.

There is also a series of charts showing recent buying ‘windows’ and where I’m waiting for some others to enter my buying territory.

Towards the end of the presentation I touch on how a scramble to secure supply led to price spikes and parabolic price moves in commodities such as Lumber and Steel, where such parabolas were (and often) followed by sharp declines.

I think there is much finished product still held as inventory, thus tying up working capital and should lead to discounting wars. This will be deflationary and assist in abating inflation and interest rates.

To be clear, I’m calling for interest rates and inflation to abate, not collapse.

September 2, 2022

by Rob Zdravevski

rob@karriasset.com.au

Long Oil is crowded

I’m advising clients to tune in where the noise is and where the herd is gathering.

Albeit, this is subjective and certainly more art than science, it’s important to identify the “crowded trade” and asking yourself if you are about to be the marginal buyer.

For example,

“everyone” is going Long Crude Oil, Natural/LNG Gas and Coal.

and “nobody” wants to buy Chinese equities nor Gold.

There is merit considering a contrarian result.

With Brent Crude Oil currently $83, I ask myself if it rises $20 or falls $20 from here?

In the coming months, I say it sees $63 rather $103.

October 13, 2021

by Rob Zdravevski

rob@karriasset.com.au

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