Interesting milestone reached by Brent Oil today – it has touched the March 2020 highs,
i.e. the price of Oil (due to the supply tightness) has exited the lockdowns…
The reopening trade is inevitable?
Author: Konstantin Fominykh
Silver market “squeeze”
Silver market “squeeze” is nothing if you properly contextualize it:
The run up in Silver prices of +21% last 6 months is ranked only #26 among other major commodities (f.e. Corn i s+74% and NatGas is +57%) and nobody writes about Lumber squeeze at +49%.
The price return of Silver sits right between Sugar +2% and Kerosene +18%. Seriously!
However, Silver confirms that commodities as a class are very undervalued due to the supply tightness and the money printing.
GameStop short squeeze saga unfolds
As this GameStop short squeeze saga unfolds,
let’s not forget how Hedge Funds initially benefited from the emergence of a RobinHood trader.
Back in March-April of 2020, when millions of young ppl were forced to stay at home with nothing to do they started first with BUYING popular household names: AMZN, MSFT, AAPL, etc.
Stocks like AAPL, TSLA and AMZN reached $2TR valuations because of Robin Hood traders maxed out their exposure there.
Robin Hood rookies were buying FAANG stocks and Pelotons exactly because they were SO obvious…
As AMZN and AAPL reached $2TR in valuations, these mega-stocks became unreceptive to the new retail money, so with some fits and starts this crowd-sourcing “market research” identified short squeezes as Achilles Heel…
And this dangerous game of GameStop has emerged…
No wonder that the short squeezes in GameStop are coincident with the underperformance of MSFT, AMZN, etc.
Stocks are not attractive enough?
Some investment strategists, like widely respected Tom Lee argue that equities would go higher, because ppl have are underinvested in stocks.
And, once we see more retail money coming into equities vs. the unattractive bonds, then the P/E multiples should go much higher…
Well, there are fundamentally 2 flaws with that argument:
And, indeed, Wall Street Bankers are working hard to bring ever more investments into the hungry hands:
1. we had 250 IPOs in 2021 alone – a staggering number
2. get enough regular stocks? Hey, wall street listed 140 SPACs for your to hang yourself with…
3. stocks are not attractive enough? Cryptocurrencies are easy to concoct…
4. still not enough? Public private equity, public venture capital and public real estate are knocking on our doors hard…
Every demand will its supply
The Market is down only -2.6%
The Market is down only -2.6%, the first draw of any significance after a 16% melt up last 6 months, yet it has prompted a statement from the SEC that they “are watching market volatility”…
Sounds like regulators (like an overbearing parent) want to ban any downside moves in stocks.
This fascinating short squeeze in GameStop helped to propel the Energy space up.
A few levered Energy ETFs and underlying Energy stocks denied the logic of the cyclical market sell-off and are up for the day…
However, the story with Energy stocks is far more fundamental (i.e. less interesting) – the recovery in the energy demand and price of Crude Oil is inevitable, with every new ration of vaccine being administered…
Martha Stewart and Kim Kardashian should be talking about vaccinating their pets (and we would support that!)
Canadian economy is flush enough
It is so refreshing to hear from the Governor of Bank of Canada (Tiff Macklem) saying that the Canadian economy is flush enough with stimulus to survive the current downturn and doesn’t need any additional injection from the monetary policy.
Maybe we can see a day when our Fiscal and Monetary authorities could have exercised some restraint and foresight that sometimes (just sometimes!) enough IS enough…
No need to overinflate everything driving the budget deficit to 25% of GDP like Zimbabwe…
Yes, the GameStop trading went nuts, and such insane moves do happen when markets are so overheated.
But what I strongly disagree with some talking heads on CNBC who claim “the craziest that they have ever seen”.
GME is far from being the craziest, not even close…
Market veterans might remember the Volkswagen short squeeze in the fall of 2008, when:
1. The stock rallied 800% becoming the MOST valuable company on the planet at that time, reaching $1TR – unprecedented valuation back then
2. that was happening as global markets were COLLAPSING into the abyss during the Global Financial Markets
So, Volkswagen was TRULY unprecedented, but GameStop – making 200% move in 5 days on a $5B marketcap? Schucks… kitten’s game.
The excessive valuation of Technology stocks conflicts with the notion of Technology being a disruptor…
Here is why: extremely high valuation of a Technology company assumes that the company would keep growing tremendously and would dominate for really, really, really long, long, long time…
Hmmm….
That means it leaves no room to let in any additional disruptors into the economic ecosystem, including its own business.
I.e. simplistically speaking when Big Tech stocks are priced at current multiples, ironically it signals NOT how much disruptive innovation they foretell but the wave of innovation is OVER…..
When Bitcoin plunges more than 10%…
When Bitcoin plunges more than 10% on Thursday, don’t even bother looking for a reason…. It had no business being so high to begin with! Buying begets more buying and selling begets an AWFUL lot of selling ….
