Welcome back to Weekend Reading.
Did you know that delta is the ratio that compares the change in price of an option, to that of a change in the underlying stock?
So, if there are 29 people infectious in the Sydney community this morning (stock), and we have 97 cases (option), what is the delta of Delta? And if we consider lockdown as a kind of “derivative strategy” over the amount of cases, and lockdown has already increased by two weeks, what is the delta of the delta of Delta?
No, cabin fever has not set in yet, why do you ask?
Let’s look back on the week.
A Robot Likes AMC
Robots are of course very intelligent – just watch a video of a Boston Dynamics creation getting pushed over with a broom, or your Roomba getting confused by a wide patch of empty space in your lounge room.
But don’t let those facetious examples fool you, as the AI-managed “Qraft AI-Enhanced U.S Large Cap Momentum ETF” (AMOM:NYSE) has consistently outperformed its benchmark.
And its latest purchase?
This is after it booted out several holdings, including GameStop (GME:NYSE), and some other titans including Facebook (FB:NASDAQ). This implies that the AI in charge of managing AMOM believes that AMC will outperform Facebook in the month of July – perhaps it has a feed linked into r/WallStreetBets.
The managing director of Qraft came out to say, “The AI is not swayed by prejudice or bias and may pick up meme stocks if the momentum seems highly positive”, so perhaps AMC has risen from meme to the lofty heights of a momentum play.
Touching briefly on the macro front, Chile’s central bank has signalled it will continue to hike interest rates, lifting the overnight rate by 0.25% to 0.75% earlier this week.
It seems that most of the policy rate increases so far have been in emerging markets, with Chile the latest LATAM nation along with Mexico and Brazil to tighten monetary policy.
Captain Planet visits the EU
The European Union has announced a bold climate change plan this week, targeting a broad base within the economy – and with it, is about to enter into some bold negotiations to turn the plan into reality.
Most industries within the EU will be forced to cut pollution by at least 55% from 1990 levels by 2030, supported by several initiatives including;
- Bring its shipping industry into the global carbon market (for more info on this, Aaron wrote a great note on carbon credits)
- Ban new combustion-engine cars by 20235
- Impose new costs and taxes on ‘dirty’ home heating
- Force the aviation industry to emit less, and pay more
Several difficult sales pitches for diplomats to undergo in the future then, with around 72 billion euros currently earmarked as ‘compensation payouts to industries which will lose out’, compensated for by expanding the market for carbon emissions.
*All numbers in USD from BofA Securities
Equities: $18.7 billion into equities
Bonds: $5.6 billion into bonds
Precious Metals: $0.2 billion into gold
Cash: $30.3 billion from cash
Flows to Know
Tech inflows trending higher
Limited redemption from reflation assets – for every $100 of inflow since November 2020; outflows from financials ($7), materials ($7), value ($13), small cap ($15)
Equity inflows slowing
But tech inflows trending higher…
Core US CPI is up 10.6% annualized in the past 3 months
Earnings forecasts reach multi decade highs
BlackRock Pays Green
BlackRock CEO Larry Fink is not buying the transitory inflation narrative.
Saying he’s seen the highest inflation in the U.S. in recent memory, he has green lit a blanket pay rise for all employees for all staff below the director level by 8% to account for the increase in costs of living.
At the same time, BlackRock has seen its assets under management for their ETF business exceed $3 trillion USD in Q2 2021 for the first time – so we can assume the BlackRock workplace is currently quite a happy one. Well done Larry, love your work.
Apple and Goldmans take on BNPL
It was announced this week that Apple would be entering the BNPL sectors with its own offering, currently dubbed “Apple Pay Later”.
Goldman Sachs will be joining them for the ride, acting as the lender for the loans which backup the instalment products, continuing their ongoing relationship from the Apple Credit Card which I didn’t know existed until right now.
Part of this rollout will be attempting to increase the market penetration of Apple Pay and the use of an iPhone to pay for goods – Apple’s existing services business already generates more than $50 billion USD per year in revenue.
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 Tuesday and Thursday mornings, 9:30-10:00am AEST.
Have a safe and enjoyable weekend.
Max and the Mason Stevens team.
Please enter your email address to gain access to this content
You are not authorised to access this content
You have already viewed this page
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.