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 to another edition of Wrapping the Week.
Before we start, let’s all sit back and take stock of where our species really is at the moment. Read and Watch. I really have nothing else to add than this: Taiwan Grandpa Catches ‘Em All Playing Pokemon Go On 15 Phones
Back in the relatively normal (compared to the above at least) world of financial markets, volatility and angst refuses to go away. First, as I cautioned last week, the crypto space got obliterated (again). This is taking a dirt nap far quicker than I thought and I continue to urge people to stay from it. As Yogi Berra said: “it’s déjà-vu all over again”.
Not that there is much else out there that looks like a great buy at the moment. Here’s our old favourite DBK GY making a new low:
Having now been drawn in into the Danske Bank debacle this German “behemoth” is also struggling with some internal issues in their central risk book: Deutsche Bank Said to Lose Money on Risk-Management Trades
Ah, the reliance on VaR. Here’s a tip…don’t! Again, I just don’t see how these Eurozone banks can recover at the moment. This is especially true now that the Eurozone is struggling again: GERMAN PMI 51.6 vs 52.2 Expected
That was the lowest since March 2016. Add to that the fact that Greek banks are making headlines again, as well as Italy’s budget mischief in the making and it ain’t looking so rosy. And with the political climate fairly rabid in the EU against further assistance, the Greeks will get more sympathy and help from the Gods at the top of Mount Olympus: How Greece Is Scrambling To Save Its Banks Again
Meanwhile, the headline to-and-fro continues for the US-China trade war. My view is that the US are really serious on this one. They see this issue, especially related to tech, in geopolitical terms for who is to be the hegemon for the remainder of the century and beyond. The fear about China getting its hands on US technology and innovation is very real. Those expecting a positive headline on this from the G20 I think should think again.
I think markets have woken up to this (or at least a little). Everything is under pressure, commodities especially. The road back to normality, if we even get there, looks a little bumpy. But the Fed seems keen to keep going in this direction. And what are we taught on the first day of work in this wonderful industry? That’s right, DO NOT FIGHT THE FED. Ultimately, markets are liquidity driven and we are now in a continued process of liquidity withdrawal after so long with all sorts of stimulus. So please do act accordingly.
After all this money sloshing about for so long, I suppose it’s only natural we start to see a few victims. First, the Renault CEO was arrested for mis-stating his income in Japan, cratering an already battered share price. Secondly, is this gem of a clip from the founder of the (now defunct) optionsellers.com
Remember, my dear people, that the markets can be brutal but they are even more brutal when you are playing around with options. While so many are feeling sorry for this guy, let’s face it – he’s a total idiot…picking up pennies in front of a steamroller.
Nothing is free in this game. The shift to automation, passives and robo-advisors all works very nicely when markets are going up. But when volatility strikes, you really do get what you pay for. Some great points discussed on this topic below by the Reformed Broker: Yards After Contact
Tech meanwhile, seems to really struggle also. The whole space looks pretty broken but then let’s look at things a little bit in context:
It feels awful, but it really is a blip! Still, it is always worth remembering the great quote from Will & Ariel Durant: “…all technological advances will have to be written off as merely new means of achieving old ends – the acquisition of goods, the pursuit of one sex by the other (or by the same), the overcoming of competition, the fighting of wars”.
Perhaps we should remind ourselves of this quote from time to time to enable a better understanding of what exactly we need technology for, and what we don’t need it for. As demonstrated by the DBK trading loss and the options sellers blow up, a reliance solely on numbers and models, without human qualities of leadership and responsibility nearly always ends up badly. Very badly.
Have a wonderful weekend and enjoy the Turkey left-overs if you are American.
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.