Welcome to another edition of Alion Partners Capital LLP’s “Wrapping the Week”, the place where we (a bunch of serious market guys) write our views about what has been going in the markets during the past week. Our commentaries and analysis are like no others’ – we take a humorous approach whilst trying to make you think about serious matters- Our aim is to be informative, analytic, precise, thoughtful, yet light and entertaining for a Friday afternoon.
Hello and welcome once again.
Before we start…there is always a stock with whom you have a love/hate relationship because it isn’t doing what it is supposed to do. You are wrong and deeply offside in a stock and all you can do is blame the algos, the Fed, the Plunge Protection Team, the shorts, the longs, the institutions… even your ex. Well, that is what most of us do or even we double up (if in trouble, double up, as we used to say on the desk!).
However, this chap below took things to a rather different level. Not something I would ever recommend despite having been desperate and wrong many times: Florida man sentenced to 40 years for plotting to bomb Target stores to disrupt stock price.
For the rest of us without paramilitary training, we’ll just continue to accept the price of the market without any such intervention.
So for the longs, a little relief this week as things have calmed down a touch. Indeed, the European Stoxx 600 looked to be heading for its best week in 2 years. Some context, of course, is needed especially when we saw headlines like these:
* NASDAQ DROPS 9.2% IN OCT. STEEPEST MONTHLY DECLINE SINCE NOV. 2008
* S&P500 DROPS 6.9% IN OCT. STEEPEST MONTHLY DECLINE SINCE SEP. 2011
China’s offshore yuan fell to a fresh 22-month low of 6.9795. In onshore markets, it was flat at 6.9673 per dollar but remained near a decade low brushed on Tuesday.
With Apple disappointing last night, it remains to be seen whether the Nasdaq can move up again. Tech, as the driver of much of the rally, is certainly the sector to keep an eye on, especially with comments like this from Peter Thiel: Silicon Valley is out of ideas, Peter Thiel says.
Indeed, Apple didn’t sell any more iPhones – they just put the price up and increased revenues by 29%. Pretty impressive. But the market did not like the commentary did after hours and was certainly spooked by the decision to no longer publish unit sales numbers in the future.
Back to China as I think this really is the main story at the moment:
After the last dose of stimulus a few years ago from the PBOC we all went on our merry way and everything turned back to the old narrative: China is growing, China is building loads of infrastructure, people are moving into the cities in droves, blah, blah, blah….and of course, this demand -whether manufactured by the government or organic-, did really exist. Mining stocks went up like hell as did the underlying commodities. This all had the happy consequence of ensuring that the economic miracle of the land down-under was perpetuated.
However, this time, the indicator of the Australian housing market isn’t looking so healthy: Sydney house prices see the biggest fall for 30 years, dragging the rest of Australia down.
One to watch, dear reader.
Trump’s obsession with the Stock Market and also the mid-terms next week meant the news flow in recent days has been far more conciliatory regarding trade than previously. I fear however this is just electioneering. Once the mid-terms are gone, Trump et all will return to punishing China and the EU. He and his team see the next few years as the fight for the 21st Century and beyond. The old order of trade multilateralism is giving way to nationalistic, mercantilist policies which, once started, cause a cascading effect to other nations. Although globalisation isn’t over, it’s certainly gonna be very different than what we have been accustomed to during the last 30 years.
Back to more charts…and it would be quite amiss of me to omit my favourite. Yes, it is…
Which, yes, my dear readers, went UP!!!! It really must be Halloween week. The story here, aside from the market bounce, is a corker from what I have read: Activist hedge fund manager studied this troubled stock for a year before finally buying a big stake.
Another activist, Cerberus, bought a stake last year (so clearly pretty underwater at that point) and, of course, we are told the market doesn’t understand the franchise, etc, etc. But what is interesting about this story isn’t DBK GY itself but these 2 facts.
1. These guys are all pretty connected
2. Hedge Fund AUM vs their stake size (AUM = USD1.4bn vs Stake = USD660m)
That’s a pretty lumpy bet, my dear boys and girls. I am not really sure how you can describe a 47% of AUM position as an appropriate one for a Hedge Fund. But hey, the definition of what a hedge fund is got watered down a long time ago. (I mean, weren’t they meant to go up or outperform even when the market went down???)
Whoops! I guess with so many of the professional shorts having been put out to pasture a long time ago by the Central Banks there isn’t really that much expertise out there when markets do go down. Well, maybe there are a few lurking around…(me???).
And finally, some great musings from the late, great, Anthony Bourdain. Worth a read indeed:
Have a great weekend!
The Alion Team.
Important notice: Copyright Alion Partners Capital LLP 2018. Not for reproduction or retransmissions without written consent from Alion Partners Capital LLP. This is a Market Analysis and Commentary and not an official research report and the views expressed in this document are those of the author(s). The author(s) are not registered research analysts and there is no assurance the trends mentioned will continue or that the forecasts discussed will be realised. Past performance may not be indicative of future results. Alion Partners Capital LLP is authorised and regulated by the Financial Conduct Authority with number 540688.