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31 March 2021
Video commentary for March 30th 2021
Eoin Treacy’s view
A link to today’s video commentary is posted in the Subscribner’s Area.
Some of the topics discussed include: Dollar strong, Gold weak, bonds trim declines to new lows, Wall Street quiet, Europe firm, Japan quiet, high yield spreads at new low, financials firm.
Morgan Stanley‘s Shalett Says Market Shows Signs of “Fragility”
This note by Steve Dickson and Jonathan Ferro for Bloomberg may be of interest to subscribers. Here it is in full:
The Federal Reserve’s policy of keeping its “foot on the accelerator” to boost the economy has left the market showing signs of “fragility,” according to Lisa Shalett, Morgan Stanley’s chief investment officer for the wealth unit.
Speaking in a Bloomberg Television interview, Shalett also says:
Fallout from the implosion of Archegos Capital Management doesn’t threaten the financial system. “This, unlike some other issues, is not of an order of magnitude where there’s systemic risk,” Shalett says
Fed policy makers are making a bet that the liquidity being pumped into the financial system is more important for the economy than the “financial accidents or bubbles” that have popped up as a result, she says
“It’s time for investors to retool portfolios,” she says, arguing that the shift should be in favor of active management and shorter duration. Economic growth will be “much stronger” than it’s been, and that’s good for cyclicals and good for the labor market, but creates headwinds for the bond market and for stock multiples, she says
Eoin Treacy’s view
The only real question is what will need to happen for the Federal Reserve and other central banks to arrest the decline in bond prices. Until that happens there will be increasing stress on leveraged trades and companies.
Email of the day on where the most leverage resides
After Greensill and Archegos, where next? The GCC of 2008 cleaned up the banks and the Tech Bust of 2000 cleaned up non-earning tech. Leverage always lies hidden somewhere, and rising interest rates usually make the best assassins. But where’s the leverage this time? Tech + Leveraged Product Roll Out? Can we put together a list of leveraged companies and sectors that will make the headlines in 2021 and 2022 as 10-year yields breach 2% and beyond? Keep up the excellent work.
Eoin Treacy’s view
Thank you for your kind words and this question which may be of interest to other subscribers. The Global Credit Crisis decapitated the banking sector and many of the tech champions of the 1990s disappeared. Both crashes exposed massive leverage and egregious abuses. The first challenge is to identify the sectors where leverage is concentrated and then what are the potential catalysts to unwind those positions.
The rush of interest in listing via SPACs is an obvious area to begin searching. Many private companies eschewed listing for years because they had no need to seek funds in the public markets. They are now eager to list because their backers want to exit while there is still time. Softbank’s wake-up call with WeWork was the catalyst for much greater interest in IPOs.
Eoin’s personal portfolio: futures long opened
Eoin Treacy’s view
One of the most commonly asked questions by subscribers is how to find details of my open traders. To make it easier I will simply repost the latest summary daily until there is a change.
Elliott Management Sends Letter to Board of Directors of AT&T
This letter may be of interest to subscribers. Here is a section:
The purpose of today’s letter is to share our thoughts on how AT&T can improve its business and realize a historic increase in value for its shareholders. Elliott believes that through readily achievable initiatives – increased strategic focus, improved operational efficiency, a formal capital allocation framework, and enhanced leadership and oversight – AT&T can achieve $60+ per share of value by the end of 2021. This represents 65%+ upside to today’s share price – a rare opportunity for any company, let alone one of the world’s largest.
Eoin Treacy’s view
There is increasing appetite for the companies that were left behind in the big 2020 surge. That’s being driven by the expectation for economic revival which will help to repair earnings potential and also by the rotation away from the stocks leveraged investors have been active in.
Dutch Stock Benchmark AEX Set to Close at Record High
This article by Jan-Patrick Barnert for Bloomberg may be of interest to subscribers. Here is a section:
After more than 20 years, the main Dutch equity benchmark is set to reconquer its record high. The AEX Index gained 0.6% on Tuesday to 702.44, surpassing a peak reached in September 2000 during the dotcom bubble era.
And just like back then, the technology sector has driven the advance. Chip stocks ASM International NV, BE Semiconductor Industries and ASML Holding NV have all more than doubled in price over the past 12 months, in addition to the online payments firm Adyen NV. But the old economy has also helped the index. Steelmaker ArcelorMittal SA is the best-performing stock over the period, as basic material shares climb on the prospect of China’s recovery and its hunger for commodities. The gains in Royal Dutch Shell Plc and ING Groep NV have also been major contributors.
Meanwhile, Amsterdam’s initial public offering market is on track for its best-ever first quarter with $5.7 billion of proceeds after hosting the 2.8 billion-euro ($3.3 billion) listing on InPost SA, according to data compiled by Bloomberg.
Since dislodging London as the continent’s top place to buy and sell shares following Brexit, the Dutch city has emerged as a strong contender as the venue of choice for new listings. Amsterdam has also become the premier destination for SPACs in Europe. The Dutch capital has hosted three of the six blank- check listings in the region over the past year. The latest of the cohort, EFIC1, which is backed by a former chief executive officer of Commerzbank AG Martin Blessing, fell as much as 1.5% in its debut session on Friday after raising 415 million euros.
“The AEX index is definitely a rare combination of good European tech companies with the addition of other top-of-the- class names in their relative industries,” said Alberto Tocchio, a portfolio manager at Kairos Partners, adding that the benchmark gauge is “a bit the Nasdaq of Europe, with the benefit of also having an exposure to some value sectors.”
Eoin Treacy’s view
The Euro’s weakness has been a tailwind for European equities on several occasions over the last decade. That’s equally true at present with the Euro pulling back and the larger European markets breaking on the upside.
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