Target (one of the US largest retailers) is down 26% today (ouch)…

Yes, the company wasn’t prepared either for cost inflation that hurt their profitability.

Curiously enough, neither were the investors, after all – they expected Target to sail well through this inflation!

However, such drops are predictable and statistically inevitable.

Why?

Look at this eye-opening chart of Target profitability (their operating margins) – being at the PEAK already!!

So, when you are at the cyclical peak, there is only one way  – DOWN, when you are at the peak something bad always happens – inflation, sales slowdown, or a new competitor entering your lucrative franchise…

Target (one of the US largest retailers) is down 26% today (ouch)…

Target (one of the US largest retailers) CEO sees a reopening shift in consumer behavior still unfolding:

1) sales of TVs (stay at home) are down big

2) luggage sales (travel items) are up 50%

Curiously enough, the CEO wasn’t prepared either for this transition or cost inflation which hurt their profitability.


Target (one of the US largest retailers) CEO sees a reopening shift in consumer behavior still unfolding:

Today was an important day in the markets, potentially foretelling a likely near-term stabilization:

1) interest rates (yields) dropped – despite a higher than expected CPI report

2) USD (DXY) index was for most of the day

3) a few important Emerging Markets Equities started digging out of the rubble: Brazil, China, Mexico

The relentless sell-off in Technology and continued outperformance of Energy was a continuation of the trend that would define this cycle.

Today was an important day in the markets, potentially foretelling a likely near-term stabilization:

The ever-changing pattern in the energy inflation mosaic is likely to come from the Natural Gas prices (both in the US and in Europe) overtaking the leadership from the price of crude oil.

Why?

  1. The price of Natural gas is far, far less politicized – how many ppl quote natgas prices daily?
  2. Adding to the confusion – the units of measurement in Europe and in the US are different (the US uses $/mmBTU while Europe uses Euro/MWH
  3. Europe has almost fully greenlighted Natural Gas as a green fuel
  4. US shipments of NatGas via LNG terminals would structurally grow year over year
  5. Europe is very, very close to banning Russian Crude Oil but sanctioning Russian Natural Gas short term is next to impossible (no immediately alternatives)

Call on what do here…

The ever-changing pattern in the energy inflation mosaic is likely to come from the Natural Gas prices (both in the US and in Europe) overtaking the leadership from the price of crude oil.

The market should bounce pretty soon

The key to watch now is now the USD – the greenback.
We need to see some weakness in it to pave the road for a market snapback.
USD is making multi-year highs but was flat-lining last 2 days.

The market should bounce pretty soon

When will this carnage in Equities stop?


We still don’t see signs of decisive reversal, but we can tell you two things with certainty:
·       the market would not make a bottom on good news
·       it would be on sellers’ exhaustion.

When will this carnage in Equities stop?

Judging by the returns on hedge funds YTD

we could likely see a few high-profile closures by the year-end.
We track at least 60 (!) large Hedge Funds trailing S&P500 by 500 bps or more, that means YTD produced negative returns of -15-40%.
Ouch…
As we all know, given the high watermark rule that most Hedge Funds follow, it is a lot easier to close the fund down (and, possibly reopen it under a new name) than dig yourself out of the losses of that proportion.

Judging by the returns on hedge funds YTD

Why are cryptocurrencies getting slaughtered in line with big speculative Tech stocks?

Because of the common ownership:

  • Are some of these folks pure short-term gamblers? Yes, a bit..
  • Are some of these folks clueless about the excessive valuations (i.e. exorbitant valuations)? Yes, a bit, but they think it doesn’t matter!
  • Are these investors facing fear and calls for liquidations? Yes, a LOT!

We call it “weak hands”

Why are cryptocurrencies getting slaughtered in line with big speculative Tech stocks?

This chart clearly depicts that Canadian crude oil production (blue line) is breaking out to the new all-time highs.

While US Crude Oil production is barely recovering (almost stagnating)…

This chart clearly depicts that Canadian crude oil production (blue line) is breaking out to the new all-time highs.

The all-important 10YUS treasury yield rate is oscillating around the eye-catching 3%

But there is nothing magic about this round 3% number.
Mechanically, the next resistance level is 3.23%
(and, hopefully, we would not get there)

The all-important 10YUS treasury yield rate is oscillating around the eye-catching 3%