Comments of the Day
08 December 2020
Video commentary for December 7th 2020
A link to today’s video commentary is posted in the Subscriber’s Area.
Some of the topics discussed include: gold extends rebound, Brexit crunch time, currency adjusted returns on stock markets, Dollar downtrend, negative real interest rates.
Email of the day on the risk of dilution
On the weekend review you highlighted Norwegian Cruiselines as one of the deeply impacted stocks along with the likes of Rolls Royce. At what point though should you be considering what has happened balance sheet wise? In their case, at the end of 2019 they had 214mn shares outstanding. At the end of Sept Q that had risen to 271mn (+27%). They have also just issued another 40mn shares to 311mn (+45% on 2019). In addition, they have issued $1.4bn in additional debt as well as convertible notes that can be exchanged for equity at prices lower than today’s price. If those notes are converted, another 120mn shares will be issued by 2022, taking the share count to a 431mn, double the 2019 share count. The enterprise value right now is $17.1bn, compared to the Dec 19 enterprise value of $18.5bn. On this basis then, NCLH is within 10% of its pre Covid-high, and so surely, we can’t look at the chart and look to the previous trading range for stock price potential. 10% above the current price is roughly $30, rather than the $50 price point the chart might otherwise indicate. The same applies to a host of these sorts of stocks such as Carnival, Royal Caribbean, American Airlines, etc etc.
Thank you for this question which may be of interest to subscribers. There are a large number of companies that have taken on extraordinary quantities of debt this year. That’s true pretty much across the board. Existing shareholders have therefore been heavily diluted.
Email of the day – on fake news
Great weekend overview of the international investment scene. Thanks.
I am perturbed, though, at your statement in the beginning about US Covid-19 deaths. According to John Hopkins, the US is now experiencing all-time high daily deaths from the virus. Please don’t add to the misinformation that has so damaged the US response to the pandemic.
Thank you for this email which raises an important topic of conversation. My best interests are aligned with the best outcomes for the subscribers to this service. This is not a YouTube channel. I’m not chasing likes or telling you what I think you want to hear. I have not identified a demographic I speak to other than people interested in making money.
We spend nothing on advertising, do not manage money or upsell additional services. The service survives or fails based on the objective facts of whether I am right more often than I am wrong. It’s a terrible business model but it is the best deal for subscribers.
People have become totally irrational about this virus. I’ve spilled enough words on the subject this year and have tried my best to avoid invective. The peak of hysteria was in September we are now coming out the other end of it. Vaccines are being made available this week.
There is clear potential we will be oversupplied by the end of the 2nd quarter. It’s the law of supply and demand in action. Governments have said they will buy whatever supply is produced. The market will respond in kind.
Turning the question of deaths. Here is a screen grab of the WHO’s website on deaths from Sunday night. It is climbing certainly but not at a new high. The CDC’s chart tested the high but did not exceed it.
People have been scared half to death by the threat of an illness. There is massive pent-up demand for all manner of leisure activities as we come blinking out into the light in 2021. The big question is how much of that will be priced in by the time we get there.
The S&P500 continues to hold its breakout to new highs but it has been flattered by the weakness of the US Dollar. The biggest takeaway from 2020 is the coronavirus has had a similar effect on the sentiment of US public officials as 9/11. They are going to do whatever is necessary to reflate the economy. Devaluing the currency to achieve that is the most expedient avenue for success.
I was not willing to admit there was a pandemic risk in the first couple of weeks of January but that changed with the first downward dynamics on the 27th and the contribution of a knowledgeable subscriber was instrumental in my conversion.
Here is a link to my commentary from the day of the low on March 23rd.
Vaccine To Extend Rebound in FY22
This summary report focusing on India from Goldman Sachs may be of interest to subscribers. Here is a section:
A link to the full report is posted in the Subscriber’s Area.
Uranium Stocks Rise on U.S. Defense Bill
This note from Bloomberg may be of interest to subscribers. Here is a section:
Uranium stocks outperformed as House and Senate lawmakers revealed a compromise version of the annual National Defense Authorization Act. Meanwhile, industrial metals continued their rally with the global equity markets.
S&P Global reported that the bill effectively provides for the military to continue a policy under President-elect Joe Biden that classifies the domestic supplies of certain minerals such as uranium, graphite and lithium as vital to national security
Ensuring ready demand for North American supply is an important support for the uranium mining sector. Many miners have been producing uranium at a loss because of significant oversupply and the price war Kazatomprom imposed. It’s been years in the making but the big question is whether the excess supply has been worked off.
Eoin’s personal portfolio – trading and investment positions increased December 1st
One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change.
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