Comments of the Day

02 February 2021

 

 

Video commentary for February 1st 2021

 

Eoin Treacy’s view

A link to today’s video commentary is posted in the Subscriber’s Area. 

Some of the topics discussed include: precious metals rebound but silver does not hold the intraday peak, Dollar strengthens on Chinese easing, Wall Street and global markets rebound, bonds yields compress and VIX contracts. 

 

 

Citadel Silver Holding Exposes Rifts in WallStreetBets Army

This article by Anna Kitanaka for Bloomberg may be of interest to subscribers. Here is a section:

Ken Griffin’s Citadel has once again found itself at the center of a WallStreetBets drama, this time over the firm’s holdings of silver.

The precious metal has become a popular buying target for retail investors keen to inflict losses on hedge funds, after posts on WallStreetBets claimed the market was ripe for a short squeeze. Yet some members of the Reddit forum have responded with pleas to avoid the trade, saying Citadel stands to benefit as a major holder of the largest silver exchange-traded fund. “CITADEL IS THE 5TH LARGEST OWNER OF SLV,” one WallStreetBets user wrote on Sunday, referring to the iShares trust’s ticker symbol. “IT’S IMPERATIVE WE DO NOT ‘SQUEEZE’ IT.”

 

Eoin Treacy’s view

The short-term pop in GameStop might have been driven by a band of retail investors and some sharp hedge fund players. The narrative has been a David and Goliath story where retail investors extract a measure of justice for the foreclosure crisis after the Global Financial Crisis. Meanwhile the narrative in silver is also a David and Goliath story, where retail and institutional investors face off against central banks and their inflationary policies. 

 

 

DoubleLine Round Table 2021

Section 1 Global Macroeconomy: State of Play and Outlook Part 1 and Part 2

Section 2: Financial Markets Part 1 and Part 2

Section 3: Best Ideas

 

 

Eoin Treacy’s view

I enjoyed this series of roundtables last year and this year did not disappoint. The points made are all relevant to the market environment as we see it today. Ther participants expressed a great deal of fear that we are dangerously close to a bubble peak. There is a lot of worry about valuations, social unrest and the effects on the credit worthiness of the corporate bond market, when the Fed is backstopping it.

 

 

Email of the day on GameStop supply and demand

Hello Eoin, First of all I want to congratulate you with your daily audio comment. A very interesting start of the day. But I have a question: In your audio you talked about the fact that ‘GME could perform a capital increase and sell a block of new shares to the HF managers that are short’. I personally think this is a great idea, it would deliver fresh easy capital to the company (a company which is not in excellent condition), give a chance to the shorters to buy a large amount of shares at the same price, and take the pressure off the market (this activity is putting the whole market under a lot of strain with the possibility of spillover effects to other markets). So why don’t they do this? I don’t understand but maybe there are some details that I’m missing?

 

Eoin Treacy’s view

Thank you for your kind words and for this important question. The first answer is perhaps GameStop’s management really are flat-footed. That has certainly been the case for the last decade because they completely missed the move to ecommerce in the same way that Blockbuster missed the jump to streaming.

The second answer is perhaps they have just not had the time to get the details together. Let’s not forget, the short covering rally began less than two weeks ago.  With prices starting to come back down and the short interest percentage contracting the brief window for potential revenue raising may have passed already.

 

 

Email of the day on Israeli vaccinations

I live in Israel and so can share with you what I am seeing on the ground. Israel’s results would have been even better if we did not have two internal communities whose behaviour is the main cause of the high contamination rates. The ultra-orthodox Jewish minority (about 15% of the population) refuses to obey the rules of social distancing. The members of this community insist on gathering together to pray and to study the religious texts. They make up about 40% of the positive cases and deaths from Covid. The Arab citizens of Israel also resists the social distancing rules and they are the other cluster of positive cases and deaths. Many of them fear that the vaccine is an Israeli plot to weaken them. The rest of the Israeli population is obeying the rules and that is why the situation is very good. At the same time as the mass vaccination there is very strict lockdown. This will probably continue for some time until so many people have been vaccinated that there is a mass immunity. The Palestinians in the West Bank have, unfortunately once again chosen an unsuccessful strategy. Under the Oslo Agreements, the Palestinian Authority is responsible for health. The PLA decided at the start of this crisis not to cooperate with Israel, but to rely on the UN for its vaccine. This is why the Arab population of the West bank is lagging behind on being vaccinated.

 

Eoin Treacy’s view

Thank you for this insight. There is a significant population of people in most countries who for varying reasons will not take a vaccine. In Israel it might be the Orthodox or Arab populations, but in the USA, there is a significant and highly vocal anti-vax community which conservatively reaches about 15% of the population.

Additionally, the black community has the been the subject of botched medical experiments in the past. Many people are leery of taking vaccines. That’s before we even begin to think about the online conspiracy theories that have been circulating over the last 12 months and have certainly affected sentiment. This article from NBC news highlights the fact that 70% of nursing home staff are refusing to get the shot. https://www.nbcnews.com/news/us-news/nursing-homes-make-big-push-change-minds-workers-who-refused-n1254509

I think it is safe to say there will be a significant minority that refuse vaccination in most countries. As we process into the year, there will be more vaccines permissioned and production will ramp up. By December there will be a surfeit of doses. By June, anyone who wants a vaccine will be able to get one I suspect. The big question at this stage is whether the conscientious objectors to taking a vaccine will be allowed to travel, work or study without one.

There is no doubt that COVID-19 is deadlier than the flu. An uncomfortably high percentage of people who develop severe symptoms, which require hospitalisation, experience a lengthy recovery. Aches and weakness are among the most common issues reported. However, risk remains concentrated in the ranks of the elderly and those who are already ill with chronic conditions.

It was obvious as early as August that a massive public information campaign would be required to ensure a successful inoculation program. That didn’t happen so there is a clear risk of difficulty in reaching the herd immunity threshold. Forcing vaccination is a serious infringement of civil liberties but it is actively being considered.

My own view is anyone who habitually gets the flu vaccine, will have little issue with getting the COVID vaccine. Meanwhile, the trial of ivermectin as a treatment for COVID-19 in the UK might prove to be the bridge between the anti-vaccination movement and the desire to reach herd immunity as quickly as possible.

 

 

Eoin’s personal portfolio – stop triggered on hedge position

 

Eoin Treacy’s view

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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