Welcome back to our weekend reading.
Capital markets across the globe saw some interesting movements this week, with uranium moving up-and-right, equities giving a bit of a tremor to keep us on our toes, and Bitcoin dropping right off the edge of a small cliff to give El Salvador a chance to buy more at a discount.
How do you react to a market like that? Well, you’re long, until you’re not.
Let’s look back on the week.
Citi Group have released their findings on the volume of bullish futures positions on U.S equities,
with the underlying message that a market correction may be amplified as a result.
Long positions on the S&P 500 outnumber shorts by a ratio of 10:1, but half of those positions will be out of the money if the index drops as little as 2.2% from last night’s close.
This implies that if a slight market correction occurs, these out of the money longs may liquidate their position and amplify a correction by sweeping all buying support out from the market.
Again, long until you’re not.
Keep an eye on that 4,435 level!
What a Hypocrite
Boston Federal Reserve President, Eric Rosengren, has been one of the biggest internal critics of risks inherent within the U.S real estate sector of late.
Does it surprise you then, that he was a particularly active investor in the space last year?
Rosengren listed stakes in four separate REITs for FY21 and disclosed multiple buys/sells in other real estate securities, as Bloomberg reports. This includes companies which actively hold agency mortgage-backed securities, which the Fed purchase $40 billion USD worth each month, as a point of reference.
He joins many other Federal Reserve officials who have shown strong trading activity, particularly in sectors hit by COVID-19, including Dallas Fed chief Robert Kaplan, who traded multiple $1m USD and above order sizes around the time of the COVID-19 crash.
‘Tis the (Four) Season
Bill Gates has announced he will take control of the hotel chain Four Seasons, after Cascade Investment LLC agreed to acquire a majority stake from Saudi Prince Alwaleed bin Talal.
In what is a re-opening trade on steroids, Gates will pay $2.2 billion USD in cash to take his stake from 47.5% to 71.25% in the hotel chain.
The company was taken private in 2007, when it had a stable of 74 hotels, with Gates and Alwaleed heading up that privatisation deal as well. The chain has grown to manage 121 hotels and resorts, as well as 46 residential holdings.
*All numbers in USD from BofA Securities
Equities: $12.7bn to stocks
Bonds: $12.6bn to bonds
Precious Metals: $0.2bn from gold
Cash: $15.2bn to cash (largest in 5 weeks)
Flows to Know
Annualised inflow to global stocks in 2021 ($1trn) is greater than cumulative inflow of prior 20 years ($0.8trn between 2001-2020)
Largest inflow to EM debt in 9 weeks ($2.2bn)
Largest inflow to REITs since Feb 2019 ($1.8bn)
11th week of inflows to tech ($1.1bn)
Largest redemptions from financials ($2.0bn) in 11 weeks, 2nd largest since pandemic began
The largest US fiscal stimulus packages of all time – Dems want $4.5trn of fiscal stimulus announced this month
U.S. budget deficits as a % of GDP
Record annualised inflow to global stocks in 2021
Pace of global central bank bond purchases decelerating
Aluminium is on a fantastic run lately, rallying all this year to reach the highest levels since 2008, primarily driven by supply-side concerns around China and Guinea.
After the recent coup in Guinea which rocked commodity markets, aluminium prices rocketed higher since Guinea supplies 25% of the world’s bauxite – a key factor in aluminium production.
Aluminium is currently trading at $2816.50 USD per tonne on the London Metals Exchange, over double the ~$1,400 USD spot price it was trading at in April last year.
Don’t Get Me Angry
Strong, green and raging like a bull, uranium has also put on a display in the price charts recently, charging ahead to the highest level since 2014.
This rally has been helped along by investment house Sprott Inc. and their Physical Uranium Trust (U.UN:TSE), which is up 47% YTD, purchasing as much physical uranium as possible – amassing over 24 million pounds of the nuclear fuel this year alone.
Bitcoin holders experienced a spot of whiplash this week, after El Savador experienced technical glitches to its official digital wallet, placing the experimental rollout of the token in jeopardy.
The slide was almost 17% on Wednesday, after the country’s rollout of BTC as legal tender appeared to have encountered a significant roadblock – this is as certain food and beverage chains, such as Starbucks and Pizza Hut, are currently set up to receive payment in crypto.
Our morning calls continue, please do tune in for a daily dose of market insights and access to some leading experts in the funds management field.
Tune in from 9:30-10:00am AEST, Tuesdays and Thursdays.
Have a safe and enjoyable weekend.
Max and the Mason Stevens team.
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The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.