Weekly rollup | Feb 06-12 2023
Stocks Mentioned: Newmont (NEM), Yamana Gold (AUY), Platinum (PPLT), Blink Charging (BLNK), FedEx (FDX), Royal Carribean (RCL), India ETF (INDA), Barrick Gold (GOLD), Grayscale Bitcoin Trust (GBTC), DHT Holdings (DHT), Western Forest Products (WEF.TO), Silver (SLV), Vietnam ETF (VNM), SVB Financial Group (SIVB)
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February 06 2023
Sell Newmont (NEM) at the open
The company made an unsolicited offer to purchase Newcrest Mining (NCM.TO, NCM.AX) at a 25% premium to Friday's close. Acquiring companies face dilution, shorting by merger arb players, and tend to have operational difficulties following a successful acquisition. Worse, Newmont already sweetened the offer once, by increasing the exchange ratio from 0.363 to 0.38 shares of Newmont per share of Newcrest Mining. They may even get caught up in a bidding war, like in the case of Yamana Gold (AUY).
Exit Newmont and stay out for the foreseeable future. Our entry at $46.4 on December 12 should give us a small profit, even assuming the stock gaps lower on this news.
There's an old adage on Wall Street, "when in doubt, stay out".
I'm unclear as to which way risk assets are headed this week. We had an epic bout of shorting (some allege naked shorting) in December with short interest going to 30-50% of share outstanding in some names, mainly tech and crypto.
January saw the shorts cry uncle and head for cover with massive losses, as the highly shorted names went up 100-300%.
Last week was bullish but the Nasdaq ended indecisively while the Dow is probably in distribution. I don't like the price action in bonds, gold and yen.
If you believe in moon cycles, we're entering the harvest phase.
I've been walking and recalling the daily charts on my watchlist for an hour now and I can't make the case one way or other based on the charts. Certainly seeing signs of weakness/ distribution, but that's only to be expected after a short squeeze. Fundamentals are still bullish (market pricing in end of recession and Fed cuts in late Q2/ early Q3, similar to 2019).
So, what to do?
I'm cutting the highest risk trades, namely bitcoin ($23.1k) and Solana ($23.62). We've had a good run with both - it's time to go to the sidelines and wait out this week. We're likely going to have a lot of chop.
Everything is fine with US consumers.
"The latest report from Transunion showed that credit card debt has soared to a record $930.6 billion at the end of 2022, a 18.5% spike from a year earlier, according to the latest quarterly report by TransUnion.
The average interest rated on credit cards has risen to 20%!
The average balance rose to $5,805 over that same period, TransUnion found.
At nearly 20%, if you made minimum payments toward this average credit card balance, it would take you more than 17 years to pay off the debt and cost you more than $8,213 in interest, Bankrate calculated.
Overall, an additional 202 million new credit accounts were opened in the fourth quarter, led by originations among Generation Z, or adults ages 18 to 25, and the tally of total credit cards hit a record 518.4 million".
Sell Platinum (PPLT)
Platinum has gone from being in a choppy uptrend to choppy sideways consolidation. There will be higher quality trades, no point in tying up capital here.
Time to put on this trade again, with a stop loss at 135. Note that this won't go into my Track Record since this is a leveraged trade in FX and it's the risk management - not the idea - that's key.
February 07 2023
Sell Blink Charging (BLNK)
The company is raising $75 million through share issuance. That's ~10% of market cap and enough to take the wind out of its sails. Continue holding EVgo and ChargePoint.
FedEx (FDX) gapped higher to close the gap lower from September 2022.
Bullish manipulation of Adani Enterprises and Ports today. I'm still in the trade, with stop loss at 1300. Today's price action would have shaken up some short sellers, but IMO the real squeeze hasn't yet begun. Thanks to a good entry (~1530) I can ride the volatility.
Royal Carribean (RCL) reported a net loss of half a billion dollars for 2022 and the stock is up 5% pre-market on the news. Chart looks amazing for a company that's in so much trouble. You can either care about the fundamentals or you can make money.
RCL up 9%.
Short the Nasdaq (~12,520)
Bonds are selling off, which means we're going to see other long duration assets follow suit. Besides, violent rallies like this don't correct by moving sideways. We're going to see fear return.
The chart that worries me the most. US 30Y T-bond futures. I want to see this continue sideways, if not higher. If yields move any higher, say to 3.8%, that'll be real worrisome for EVERYTHING. Doesn't look likely, but I'm aware of the possibility and have taken down exposure just to be safe.
From Meta Q4 earnings call:
"Reels plays across Facebook and Instagram have more than doubled over the last year, while the social component of people resharing Reels has grown even faster and has more than doubled on both apps in just the last 6 months."
The stock is no longer a disaster and I sold my position today. Taking down my tech exposure for this week, will re-evaluate over the weekend.
Of all the ETFs I track, the India ETF (INDA) has the lowest 30-day RSI of 36. That compares against 63 for the Nasdaq, 54 for the Dow and 43 for earthquake hit Turkey. No, this has nothing to do with Hidenburg or Adani. This is broad based weakness.
Take advantage of the Fed rally and sell Barrick Gold (GOLD).
Also close the remaining EV positions - CHPT and EVGO.
Powell was uber bearish, talking about rate hikes continuing for longer unless more people lose their jobs and get their wages reduced. Markets rallied on this sound bite, so I used the opportunity to sell a lot of my holdings. That's the context for the Sell recommendations above.
Sell Grayscale Bitcoin Trust (GBTC).
February 08 2023
Uranium appears to be stuck in a range. It's a Sell if you want to raise cash, but a Hold otherwise. I'm keeping the trade open for this service, but giving you a heads up nonetheless.
February 09 2023
DHT Holdings (DHT) announced EPS and dividend of 38 cents for Q4, and total 2022 EPS of 48 cents. The stock closed at $9.12 yesterday, which is a PE of 19x. Somewhat expensive for a cyclical business but the stock should open higher on the news. We covered the short position at $8.56 for a gain of 19.25%. That was good timing, in hindsight.
India's Nifty Index has had 7 inside days since Jan 31st. I've never seen anything like it for a major index. Personally, I'd want to be a spectator and not a participant when a market moves like this. The easier trade is going with the trend, whichever way this breaks.
Western Forest Products (WEF.TO). Still holding up.
Silver still holding above 100 DMA but I'm beginning to have my doubts on an island reversal. The risk/reward is still pretty good, so not cutting the trade yet.
February 10 2023
Sell Silver (SLV). Didn't hit my stop but didn't blast higher as expected either. Can always try again once the direction is clear.
Sell Vietnam ETF (VNM). The ETF has round tripped from our entry and looks weak technically. I prefer to cut trades that round trip and re-enter if the price action improves; takes the emotion out of it. Otherwise, I'm just going to keep hoping for a bounce and take unnecessary losses, plus tie up capital. Could have exited sooner, but hindsight is 20/20.
Sell SVB Financial Group (SIVB)
Weakness in Nasdaq should translate into weakness here. The stock has filled the October gap and the easy money has been made. I'm lightening up ahead of the CPI release on Valentine's day. Reports of consumer confidence in January and anecdotal evidence of higher discretionary spending make me nervous about the CPI. Although the CPI is bound to go negative in Q2 or Q3, we may get a "surprise" in the January number, and that's all the excuse the bears need to come back out of hibernation. The skew is now to the downside rather than the upside, unlike in October or December 2022. So, lightening up.
February 11 2023
Commodity Trader Trafigura Faces $577 Million Loss After Uncovering Nickel Fraud
Bed Bath & Beyond Is the Latest to Question This Company's Egyptian Cotton
Indian equities are riding high even as foreigners exit the country and the Western perception towards India being the land of opportunity shifts to India being the land of accounting fraud and fake products. Why? Dumb retail money buying the top. Happens every cycle in every asset class. Don't be the dumb retail and dump Indian equities. There's major resistance overhead at ~18,062 on the Nifty. Even if you have a bullish view, that's a better entry. Holding and hoping is not a viable strategy in this volatile market.