The Week Ahead
The Week Ahead
Volume 113 - Roaring 2020s, tell me why stocks can't head higher?
Good morning all wherever you might be,
Let me start by saying, what a week! Just last week, we crossed 11k subscribers, and now we’re at 12k. Huge thanks to everyone who’s been part of the journey and welcome new subscribers. Let’s dive into this week’s insights.
Market Overview: Last week, my trades.
Last week was slow overall, but my portfolio’s equities performed well, and the new gold trade I shared in last week’s post showed promise. Oil, on the other hand, had a more challenging week. While initial gains from my oil risk reversal shrunk, there’s still plenty of time until expiry. Interestingly, despite reports of Nasrallah’s death over the weekend, oil is quiet this morning, likely due to OPEC’s production increase on Dec 1 and Saudi Arabia abandoning its $100 crude target. Regardless, I think that the pessimistic positioning in oil will provide a tailwind if oil can’t break its recent lows as shorts will quickly be forced to cover on any aggressive rejection.
Contrarian short on the China hype — cautiously fading the ‘bazooka’.
I didn’t mention it Friday, but at close I shorted FXI at a 3% weight. Currently pre-market FXI trades at 32.94. The whole bazooka hype… we have seen this before. Repairing a balance sheet isn’t simple and deflationary pressures don’t go away straight away regardless of how much money you throw at a problem, too much too fast? you risk the opposite of deflationary pressures. It’s a contrarian take fading China and one that’ll be happy to cut quickly if I am wrong. Positioning does remain bearish but for a sustained move higher you need to see LO demand for Chinese equities, and thus far judging by price action and what I have heard from desks is that it’s all fast money thus far. I do own a European stock that’s a China beneficiary so I guess one could say I am sitting on the fence post for this. If you do want to be long China, I do think buying European China beneficiaries isn’t a bad idea. Seems a good argument for the China rally to continue is when you compare multiples of large Chinese stocks vs US stocks. Heads up, China Golden week starts Oct 1…
Flow wise, Chinese stocks are getting it all, Goldman Prime stated that Chinese names saw the largest weekly net buying on their book’s record, driven almost entirely by long buys. The madness of crowds and all that… The thing is, does a temporary stock market bailout affect the real economy? See some Chinese flow graphics below…
Not much follow through for index since FOMC. Last week was dead as a dodo. I had upside for Friday which I put on early in the week but expired worthless, fortunately I covered costs when it was up over 100%.
The MU 85p for Oct18 we sold at 3.53 was cut at 0.06. Most holdings in both my L/S and LO portfolios performed well too. If you have lost the link to my holdings, please DM me. I will update at some point this week.
Busy week on the data-front to come, so let’s dig in.
Quick note to paid subscribers: head to my Substack chat to enter the Q4 competition. Winner takes all, $2,000 to the winner.
Stocks - the biggest will get bigger