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Monday 6th December 2021
Hi Friend,
TSE Monday Morning Markets ...
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| | The Saturday Economist Monday Morning Markets ...
This is our Monday Morning Markets Update for the 6th of December. Markets were mixed. U.S. stocks closed down 1.5% as Shanghai rallied. Bond yields moved lower, Sterling steadied against the dollar. Bond yields fell, Bitcoin crashed through the $50,000 dollar level. Tech stocks look vulnerable.
"Markets are madder than ever" warns Charlie Munger, vice chairman of Berkshire Hathaway. "It's now even crazier than the dotcom boom". Market makers are nervous. "Fear of Missing Out" is yielding to Fear of Being In". We include this week, our over valuation scores for the index basket.
Top line, "Cash is Trash, (Jamie Dimon), Bonds are Garbage ( Bill Gross), Equities Are Overvalued (Everyman), Bitcoin is worthless (Jamie Dimon), Most NFTs are junk (John Hargrave)" ... When it comes to understanding market moves, "Any explanation is better than none" (Nietzsche). Be careful out there ...
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| | Markets down 0.5% ... Overvaluation +6.8%
Our index basket closed down this week -0.5%. Biggest falls were Nasdaq and Nikkei. FTSE and Shanghai were in positive territory.
Our over valuation index fell to +6.8% for the basket as a whole. The American components leading the charge with a 13.7% over rating. The Nasdaq trades 16% above bench. Hang Seng and FTSE the best value on the block.
Markets are looking for a reset, now mainly in the U.S. "Fear of Missing Out" is yielding to "Fear of Being In"...
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| | Bond Market Sentinel ... US Ten Year Yield 1.44 ...
US ten year bond yields moved down 9 points to close at 1.44. In the UK ten year gilts closed down 4 points to close at 0.80. So much for fears of inflation in forward markets.
In Japan rates were down slightly, euro rates moved down 5 points. Next the test of 1.80 in the US and 1.25 in the UK? That may have to wait for later in 2022. Don't expect a rise in base rates before Christmas. Our Friday Forward guidance offers the more complete picture on forward rates.
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| | Exchange Rates ... Sterling down to $1.3307 ...
Sterling closed down against the dollar at $1.3307 from 1.3319 and down against the Euro at €1.1757 from €1.1881. Michael Saunders suggested any December rate rise would await further Covid news, hitting Sterling sentiment.
Last week's moves looks to be a consolidation from a downside move overdone. $1.38 may be the extent of the Sterling rally. Love those dollars ... make the switch on the rally ... average in along the way ...
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| | Empires of the Cloud down 2.0% ...
Our Empires of the Cloud Fund was down 2.0% this week. All bar Apple, were down as sentiment moved against tech growth stocks. Apple fared well given the strong cash balance sheet as perceived growth risks rise.
Our valuation index suggests a 15% over reach. A combined market cap of $9.6 trillion and an average PE of 36.1 suggests a period of consolidation should follow at best. Technically, Apple, Microsoft and Google look vulnerable to a near 20% reset. FB offers fair value.
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Crypto Wallet down -12.5% ... Another bad week for Bitcoin fans. The crypto wallet was down 12.5% with a big fall in Bitcoin, Dogecoin, Ripple and Litecoin. Ethereum the only positive in the pack up 11%.
Bitcoin closed down to finish at $47,100 hitting $44,000 intraday on Friday. Where next for Bitcoin? Prices crashed through the $50,000 dollar level with startling ease. A further test of the $40,000 level may follow but the big Apes may be ready to rally.
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| | Oil Brent Crude trades lower ... $70.39 ...
Oil
prices Brent Crude closed lower at $70.39 last week. Markets reacted to news of the Omicron variant. OPEC committed to boosting output in the short term.
The US oil rig count held at 467 last week. We expected the pull below $80 dollars to hold, $75.00 to $80.00 may be the range for the Brent Crude Winter trade. The EIA forecast of $72 dollar oil through 2022, doesn't look quite so optimistic at the moment. The inflationary impact of oil prices will fade into Q2 next year.
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| | That's all for this week's Monday Morning Markets, have a great week ...
John
Friday Forward Guidance, The Saturday Economist, Monday Morning Markets
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