Monday, February 10, 2020
Please
find below our latest Weekly Trend Update Report covering major
asset classes and currencies.
Have
a nice week and good luck.
Marc
Bentin
Bentinpartner GmbH
Trend
Status Update
Some analysts argued that, at least semantically, the corona virus is
not a Black Swan because an outbreak of some sort was inevitable and
predictable, not fitting the definition of “unknown unknown” of unquantifiable
consequences. We are no specialist in epidemiology and won’t improvise
ourselves as such. As everybody else, we look at the number of casualties going
up and spreading, hoping that the vaccine and containment measures in China and
elsewhere will prove effective. In the meantime, the official death toll
surpassed that of SARS (at 813), new cases were confirmed outside of China and
the massive release of sulfur dioxide gas from the
outskirts of Wuhan suggested that the official tally may be underestimated. It
is the passing away of Dr Li, a 34 year old medical doctor (who became famously
popular as a whistle blower of the disease outbreak) last week that elevated
concerns (I noticed people crossing the street as a child coming in the
opposite direction was coughing in Basel yesterday to reflect on the mounting
worldwide paranoia) but not sufficiently to unsettle the sentiment on Wall
Street which remained focussed on Tesla going off chart, reasonably good
earnings and economic reports (Friday’s US job report came in better than
expected) and the overwhelming impression that the Central Banks’ put remains
firmly in place. What made the situation highly unusual last week was a feeling
of dual panic. On the one hand, the possible spreading of the disease and of
its economic consequences (China is now 18% of World GNP from 5% in 2003 with a
world economy much more dependent on Chinese exports for its supply chain with 170mn
Chinese travellers criss-crossing the world, more than 10 times their numbers
at the time of the SARS outbreak) had many worried. On the other hand, the
impossibility of getting any correction on any bad news froze the blood of
shorts and those under weighed in risky assets. Perhaps, if a Black Swan does
not scare anyone, the Grey Rhino getting at us with a highly probable big
impact ultimately will... For the
moment, the only vaccine comes from the Fed’s “non-QE”.
Elsewhere in US politics, the debacle of the Iowa Primaries was a real
blow for Democrats in general (allowing D. Trump to clamour something to the
tune that if Democrats cannot handle a primary, their management of the country
would be even worse) and for J. Biden, in particular. If J. Biden stumbles next
week in New Hampshire (as is likely), M. Bloomberg might still emerge as the
sole credible alternative to D. Trump. In our view, Sanders is the Corbyn of US
politics and E. Warren, a “socialist” under the influence of deep French accent
socialist ideologues à la Picketty (whose arrogance
on Bloomberg TV last week was off the chart) who will come as a liability for
her. Mocking Pete Buttigieg for his (German)
unpronounceable name was not strikingly courteous from D. Trump but it won’t
help him for sure (Issur Danielovitch
Demsky became more popular when he changed his name
to Kirk Douglas). Neither will his lack of following among the black community
or his gender preferences. Baring a miraculous comeback of J. Biden, (the
latest poll shows Sanders and Buttigieg leading with 28% to 21% over J. Biden
and E. Warren coming in third and fourth with 12% and 9%, respectively), “mini”
(as mocked by D. Trump) Bloomberg could well end up drawing the long straw as
the ultimate challenger to D. Trump whose support, according to Gallup’s most
recent poll, stands at a rather exceptional 49%.
Mike Pompeo went to Belorussia last week, suggesting that the US could
sell oil to the country. Nobody listened, too busy with the corona virus and
the Tesla squeeze. V. Putin did not
respond to the provocation either.
One of the remaining investment themes (along with the value proposition
of EM markets that was placed back on the shelter for now) remains “sustainable
and green” investing. So, we decided to look into this theme (beyond taking
public transportation, scrapping plastic bags in our shopping, switching to
heat pumps and waiting for an attractive and still affordable enough suggestion
to replace our history filled and still perfectly running German 13-year-old
diesel car) to tilt our investment strategy towards greener. In our search we started screening for ETF’s
focussed on that theme and what we found first was four letter word ETF of
which the AUM more than doubled since January and was multiplied by 10 since
last September, now totalling more than USD7bn. We were a little puzzled to see
this ETF paying less than 1% dividend compared to the slightly less mediocre
1.7% available on the S&P500. But who needs an old-fashioned dividend these
days? Investing in this ETF is for good cause anyway and an act of philanthropy
from those managing other people’s money. What unsettled us more was to see
that the top holdings of this ETF were the exact same Microsoft, Apple, Amazon,
Facebook, Alphabet composing the top holdings of the S&P500 of which the
performance is driven, for the most part, by the same four or five names. We
have no problem with any of those specifically, nor with the fact that the same
old names that drive demand into US markets should drive what has become an
exploding demand for “green investing” vehicles or managers, just as if any of
these names should be seriously associated with green investing. For what it is
worth what currently drives growth for “all” of these companies (with the
exception perhaps of Apple) is the cloud business which is a heavily carbonated
activity serving the purpose of storing -for the most part- old pictures and
emails for over 15 years, in an exponentially rising fashion (including for the
people that have passed away). Most of this data is stored on millions of
electricity consuming servers that are cooled with fresh waters from the
oceans, actively contributing to warm up the oceans, heat up and disrupt the
climate, for the sole purpose of having robots parse every mail that we write,
remember links that we click to serve our internet experience with tailor made
ads that we neither want, nor need, nor can get rid of and in violation of our
privacy rights (except of course that we keep signing disclaimers that discharge
anybody of being accused to do so).
Even Microsoft which outsmarts most in its peers in its investors’ communication
strategy, vowed to become carbon “negative” by 2030 and to take back all the
CO2 that it produced since its creation by 2050. That is a very laudable
intention. But the way it will work is mostly through “replacement” by planting
trees in compensation for the CO2 emitted. Should everybody decide to proceed
the same way, we will run out of arable land soon to plant those trees…
Every problem should be taken and treated at its root.
Developing the cloud, as all these companies, sold to us as being
“green”, are now doing is not the long-term solution. There are many reasons to
want to buy these names (Trump twitter feed pushing up the S&P at any
downturn (and upturn), trend, momentum, buy backs and rates heading to zeros
being the main ones) but there is no need to add a “green label” to them so as
to also give investors a good conscience on a less than convincing argument.
The solution is to change/force people’s behaviour in their every day’s life
(even if you delete your emails diligently somebody might store them somewhere
for some reasons but you can delete the pictures or better store then on one or
two hard drives at homes that do no harm) not in buying an ETF filled with
names that earned a green label only too often for the merit of not being a car
or oil related company. In some ways, it is just another way of feeding Wall
Street, twisting markets and fuelling … “just” bubbles with the manipulation of
the masses rather than addressing the problem at its core.
This of course did not close our search for truly green stocks…
Over the past week, the S&P500 rallied 3,3% (3,2% YTD) while the
Nasdaq100 rallied 4,6% (7,8% YTD). The US small cap index rallied 2,7% (-0,5%
YTD). CBOE Volatility Index sold off by -17,9% (12,3% YTD) to 15,47. AAPL rallied
3,4% (9,0%). FB rallied 5,2% (3,4%).
LYFT rallied 5,1% (16,0%, Z-score 2,2). AMZN rallied 3,5% (12,5%). NFLX rallied
6,3% (13,4%). GOOG rallied 3,1% (10,6%). MSFT rallied 8,0% (16,6%, Z-score 2,0). INTC
rallied 3,3% (10,3%). IBB (ISHARES NASDAQ BIOTECHNOLOGY)rallied
6,8% (0,8%).
The Eurostoxx50 rallied 4,5% (2,0%), outperforming the S&P500 by
1,3%.
Diversified EM equities (VWO) recovered 2,2% (-3,4%), outperforming the
S&P500 by -1,0%.
The Dollar DXY Index (UUP)
measuring the USD performance vs. other G7 currencies gained 1,4% (2,7%,
Z-score 2,2) while the MSCI EM currency index (measuring the
performance of EM currencies vs. the USD) dropped -0,2% (-1,3%). EURUSD dropped -1,3% (-2,4%,
Z-score -2,1).
10Y US Treasuries underperformed with yields rising 8bps (-33bps) to
1,58%. 10Y Bunds climbed 5bps (-20bps) to -0,39%. 10Y Italian BTPs climbed 1bps
(-47bps) to 0,94%, matching Bunds.
US High Yield (HY) Average Spread over Treasuries dropped -36bps (18bps)
to 3,54%. US Investment Grade Average OAS dropped -7bps (5bps) to 1,06%. In
European credit markets, EUR 5Y Senior Financial Spread dropped -5bps (-3bps)
to 0,49%.
Gold dropped -1,2% (3,5%) while Silver dropped -1,9% (-0,8%). Major Gold
Mines (GDX) sold off by -3,7% (-4,6%).
Goldman Sachs Commodity Index dropped -0,8% (-11,6%). WTI Crude sold off
by -2,4% (-17,6%).
Trend Score Card
US
& International Equities
Check out US and International Stocks’ Technical
Trend Status.
Sector
Trend & Momentum
Check equity sectors’ trend and performance …and when
they break out!
Fixed
Income
Check out 10Y US Treasury and Bund yields, their
trend, expected Fed rate moves and speculative positioning in 10-year Treasury
Futures.
US Recession
Risk Radar
A comprehensive list of
economic indicators to compare the current situation with previous recessions.
The
Dollar
Check out where the Dollar stands Trendwise and Breakoutwise vs. G7
and EM counterparts.
Precious Metals
Check out where precious
metals stand Trendwise
and Breakoutwise.
Get a sense of options (cumulative open interests on calls and puts) and
futures traders’ sentiment (non-commercials open positions).
Check out how precious metals, the dollar and the
Stock market correlate with each other and speculative futures positioning
on Gold and the Dollar.
Why Trend Following Matters and How It Can Help
You?
A disciplined and rule-based
trend following investment approach can serve as an effective portfolio
insurance technique.
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Portfolio Management Services
BentinPartner GmbH is a
Swiss registered independent financial adviser. We offer four different
portfolio management mandates:
- The “Global
Strategic” (GS) mandate invests your portfolio according to an
optimized strategic benchmark. This allocation delivers the “beta” (or markets
related) performance of your portfolio while we seek to generate additional
“alpha” (“skills related) performance with tactical adjustments, using a
predefined maximum “value at risk” envelope. Most of the portfolio’s
performance is derived from the strategic Benchmark (beta).
- The “Global
Tactical” (GT) mandate
invests your portfolio without tracking a strategic asset allocation (or
benchmark) and pursues a “total” as opposed to “relative” return objective.
With this mandate, we seek to beat the best of “cash” or of the MSCI World
Equity index, applying mostly tactical considerations,
using a
predefined maximum “value at risk” envelope and targeting not to exceed a
predetermined overall portfolio volatility.
- The “Trend/Momentum”
(TM) mandate, builds a diversified “All Weather” investment portfolio and
applies a rule-based Trend/Momentum methodology to adjust this “trend neutral”
allocation. We track trends across asset classes on a daily basis and adjust
your portfolio in a semi automatic (there is always a pilot in the plane)
fashion applying trend changes signals.
- The “Currency Overlay” (CO) mandate
seeks to generate “alpha” applying a currency overlay with a limited leverage
(not exceeding 100% of NAV). You control the portfolio allocation (which can be
a pool of cash, stocks, bonds or gold) and we manage in overlay the FX exposure
of your portfolio, seeking to add a total FX return of 4% to 7%.
For more information on our risk management and
investment methodology, please check our web site.
We deliver transparent, professional, tailor-made,
and competitive asset management services, seeking to fulfill our fiduciary
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Please visit our web site or call us at
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