I take late-summer off from writing weekend notes. Reading more, recharging. And I’m working on a longer-form piece about a favorite strategy for the wild decade ahead. A scalable opportunity whose star is rising. Something overlooked, unloved. Be back with it in early September.
In the meantime, dusted off an anecdote from 2012 about one of my favorite life moments, and the importance of playing your own game, biding your time. All the best, E
Week-in-Review (expressed in YoY terms): Mon: US formally blamed Iran for attack on Israel linked oil tanker, US legislators finalized details on $1T infrastructure package, China reindicated support for pro-growth policies, Fed’s Waller says he could back “tapering soon” if employment warrants it, China says this round of covid could wipe out 5% of short term oil demand, China Caixin mfg PMI 50.3 (51e), German ret sales 6.2% (3%e), Swiss CPI 0.7% as exp, EU mfg PMI 60.4 as exp, US ISM mfg 59.5 (61e), S&P -0.2%; Tue: RBA keeps taper plan intact (starting after Sept) despite the market expecting the start of tapering to be delayed due to recent lockdowns, speculation that China will clamp down on online entertainment industry next, RBNZ deputy governor floats prospect of macro prudential measures to calm hot housing market, SF reinstates mandatory indoor masks regardless of vaccination status, NZ home prices 24.8% (22.8%p), Australia building approvals -6.7% MoM (-4%e), Swiss conf conf 7.8 (-5.3e), Turkey CPI 18.95% (18.6%e) / PPI 44.92% (43.6%e), EU PPI 10.2% (10.3%e), Brazil IP 12% (12.5%e), US durable goods 0.9% (0.8%e), S&P +0.8%; Wed: BCB hikes 100bps to 5.25% as exp, Fed Vice Chair Clarida hawkishly emphasized inflation is approaching his upper tolerance / could “see making taper announcement later this year” / “conditions for raising rates will be met by year end 2022”, Greece/Sweden announce vaccination booster in next year, WHO calls for 2m moratorium on booster shots to prevent wealthy nations from hoarding vaccines, NYC requires workers and customers at indoor restaurants and gyms to prove vaccination status, China’s state owned media eased criticism of online entertainment industry, ECB’s Kazak noted a Sept decision on PEPP tapering would be premature, Treasury announces supply cuts as early as November, S&P -0.5%; Thur: BOE unch as exp (1 vote to adjust asset purchase program), China urges travel restrictions and testing as covid cases rise, Erdogan presses CB to cut rates, Biden aims for half of all cars sold to be electric by 2030, Biden offers a “safe haven” to Hong Kongers in the US allowing them to extend stay 18m if afraid to return home, US initial claims 385k (383k exp), S&P +0.6%; Fri: US NFP 943k (870k exp) / unemp 5.4% (5.7%e) / AHE 4% (3..9%e), RBA admits not wanting the exchange rate to rise, CBO says $1t infrastructure bill will add $256b to nat’l debt by 2031 despite bipartisan claims that it will pay for itself, Canada emp change 94k (150k exp) / unemp 7.5% (7.4%e), S&P -0.5%.
Manufacturing PMI (high-to-low): Switzerland 71.1 (previous month 66.7), Netherlands 67.4 (previous 68.8), Germany 65.9 (prev 65.1), Sweden 65.3/65.4, Austria 63.9/67, Norway 63.31/61.3, Czech Republic 62/62.7, UK 60.4/63.9, Italy 60.3/62.2, Taiwan 59.7/57.6, United States 59.5/60.6, Spain 59/60.4, France 58/59, Poland 57.6/59.4, Greece 57.4/58.6, Brazil 56.7/56.4, Canada 56.2/56.5, Hungary 55.6/55, India 55.3/48.1, Turkey 54/51.3, South Korea 53/53.9, Japan 53/52.4, Hong Kong 51.3/51.4, Singapore 51/50.8, China 50.3/51.3, Mexico 49.6/48.8, Russia 47.5/49.2, South Africa 46.1/51, Vietnam 45.1/44.1, Indonesia 40.1/53.5. Services PMI: Sweden 69.1/67.9, Ireland 66.6/63.1, Spain 61.9/62.5, Germany 61.8/57.5, US 59.9/64.6, UK 59.6/62.4, Italy 58/56.7, France 56.8/57.8, China 54.9/50.3, Brazil 54.4/53.9, Russia 53.5/56.5, Australia 51.7/57.8, Japan 47.4/48, India 45.4/41.2.
Weekly Close: S&P 500 +0.9% and VIX -2.09 at +16.15. Nikkei +2.0%, Shanghai +1.8%, Euro Stoxx +1.8%, Bovespa +0.8%, MSCI World +0.9%, and MSCI Emerging +1.2%. USD rose +4.1% vs Chile, +2.1% vs Turkey, +0.9% vs Euro, +0.9% vs Mexico, +0.9% vs Sweden, +0.6% vs Canada, +0.5% vs Yen, +0.4% vs Brazil, +0.3% vs China, +0.2% vs Sterling, +0.2% vs South Africa, and +0.1% vs Russia. USD fell -15.5% vs Ethereum, -4.4% vs Bitcoin, -0.8% vs Indonesia, -0.3% vs India, and -0.2% vs Australia. Gold -2.9%, Silver -4.8%, Oil -8.1%, Copper -3.2%, Iron Ore +11.7%, Corn +2.2%. 5y5y inflation swaps (EU -2bps at 1.65%, US +1bp at 2.38%, JP +4bps at 0.20%, and UK +3bps at 3.82%). 2yr Notes +2bps at 0.21% and 10yr Notes +8bps at 1.30%.
YTD Equity Indexes (high-to-low): UAE +47.1% priced in US dollars (+47.1% priced in dirham), Saudi Arabia +29.1% priced in dollars (+29% in riyal), Austria +22.9% in dollars (+28.5% in euros), Taiwan +20.3% (+19%), Sweden +20.1% (+27%), Canada +19.3% (+17.4%), Czech Republic +19% (+20.6%), Netherlands +18.2% (+22.9%), S&P 500 +18.1%, France +18.1% (+22.8%), Hungary +17.5% (+19%), Russia +17.4% (+15.7%), Denmark +16.8% (+22%), Finland +16.4% (+21.7%), Mexico +15.5% (+16%), MSCI World +15.2% (+15.3%), South Africa +15.1% (+14.9%), NASDAQ +15.1%, Poland +14.8% (+19.9%), India +14.3% (+16.1%), Belgium +14.3% (+18.8%), Russell +13.8%, Norway +13.6% (+17.6%), Euro Stoxx 50 +13% (+17.5%), UK +12% (+10.3%), Italy +11.9% (+16.9%), Israel +11.9% (+11.9%), Argentina +11.6% (+28.6%), Ireland +10.8% (+15.2%), Germany +9.9% (+14.9%), Switzerland +9.7% (+13.8%), Australia +9.4% (+14.4%), Singapore +8.9% (+11.7%), Korea +8.1% (+13.8%), Greece +6.2% (+10.4%), Spain +5.8% (+10%), Brazil +2.1% (+3.2%), Indonesia +1.2% (+3.8%), China +0.3% (-0.4%), Portugal -3.2% (+0.6%), HK -4.2% (-3.9%), New Zealand -4.9% (-2.5%), Japan -5.1% (+1.4%), Thailand -5.9% (+5%), Chile -7.2% (+2.5%), Malaysia -12.8% (-8.4%), Philippines -13.2% (-8.4%), Turkey -16.3% (-2.8%), Colombia -26.2% (-14.7%).
Anecdote (Summer 2012): “I emptied my mind,” she explained, looking through me, returning to that mental place in the moment before her race began. I bit my lip to keep from smiling, even laughing. You see, she’s just 8yrs old, tiny for her age – seriously – like the 1th percentile. Yet Olivia’s coach has her swim against 11-year-olds. I don’t protest. Not my style. Plus, I’m pretty certain her coach quickly realized she has an inexplicably strong sense of self, loves to play up, and is uninterested in competing against peers; she just isn’t wired like most. Anyhow, Olivia took her lane one minute before the race began. Couple hundred spectators surrounded the pool. “Oh just look how teeny that girl is,” giggled the crowd. She cooly reached down, scooped handfuls of chilly pool water onto her skinny arms, toothpick legs, splashed her face. And focused intensely on her lane, as the older opponents observed Olivia’s unconventional ritual, amused, distracted. “Take your mark,” ordered the starter. “Pop,” and they leapt. For a 50-meter freestyle. Olivia hit the water last, like pretty much every race I’ve ever seen. And starting from last place she mounted her trademark challenge for 2nd to last, stalking the sick, the wounded. She finished a distant 6th. And having lost the race, but won many hearts, my little girl marched up to the Officials. Alone. Standing tall. Proud. On a natural high. “Excuse me, may I have my time?” she asked. You see, Olivia wants to win so badly it hurts. But she can’t yet. And knows it. So instead, she’s focused on her time, embracing it, improving it. Biding it. You know, odds are she’ll never be much of a swimmer, but someday, she’ll make a great trader.
Good luck out there,
Chief Investment Officer
One River Asset Management
Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, drink with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.