Welcome to a lot of new subscribers. Today’s letter is not necessarily typical of a usual day. I am not sure there is such a thing as a usual day. I write what I think is most relevant, some times short, some times long. I welcome feedback both critical and positive. In fact, earlier today I took Ray Dalio’s personality test as part of his beta testing group. I love radical transparency.
S2N Spotlight
This 1721 painting by Deitz Nuützen predicted the Trump-Elon-RFK McDonald’s in-flight dinner.
Of course the above statement is nonsense, and the picture similarity is pure coincidence, albeit uncanny and hard to unsee the similarities. This is exactly the point I was trying to make yesterday in my piece on randomness. Anyway, moving along…
I feel like we are experiencing one of the most incredible degrees of FOMO in the markets at the moment, which has all the hallmarks of a major turning point. We have valuations stretched to the max, and we have irrational exuberance to the max x2. I have discussed this before, so I am not going to rehash it again now. I would just like to add to the list of factors measuring irrational exuberance the fact that the dictator of a country with the world’s most nuclear warheads, Russia, notified the world yesterday that he will go nuclear if Ukraine should fire long-range missiles into Russia. Ukrainian President Zelensky explicitly stated they would continue firing long-range missiles at Russia and the stock markets in the US rally. Zero worry. You know some irrational zeitgeist is in the air.
While I am listing factors for irrational exuberance, I have to add one more to the mix, and then I will get onto the Blindspot topic. MicroStrategy is now trading at 3x the value of its Bitcoin holding. While I have admired the resilience of Michael Saylor given the size of the bet he has placed on Bitcoin, he is really starting to sound like a deranged cult leader. People feeding his Ponzi are exhibiting some of the worst forms of greed and ignorance I have seen in a long time. This is not to denigrate Bitcoin; I am referring to the absurdity of buying stock in his company so that he can go and buy Bitcoin and even borrow to buy it no less.
Today is the first time I have ever embedded a pdf into one of the 183 newsletters I have written. I read this Gavekal research about how the West has taken its eye off China. With the West focused on China’s real estate-induced economic slowdown, China has been focused on building its industrial complex. I think it is well worth the read, as we are rarely fed quality research on the ground. Make no mistake, I am pretty sure for Gavekal to maintain their Chinese presence; they are not speaking without some form of censorship, even if self imposed.
Finally, I get to my idea.
A couple of months ago I made the contrarian call to go long China (via the Hang Seng) and short the US; let’s revisit the trade. The best way to monitor the trade is through the ratio of the SP500/Hang Seng. The trade idea has been profitable, but the last few weeks the trade has given a lot back. I am sticking to this idea.
For the sake of completeness, I will add a chart of comparative global stock exchange performances.
S2N Observations
My 22-year-old son, who lives overseas, asked me to transfer him some funds to purchase some equipment for a donation. I asked him what his bank account details were. He had no clue what a SWIFT number or an IBAN was. I did a small transfer to make sure it got to him. He then started asking when the money would hit his bank account. I said give it a couple of days. It took 2; when it landed, he saw a bank charge and an amount less than he had anticipated due to FX conversions.
This was my gap to launch into an explanation of the merits of crypto and probably its main use case. The merits of digital currency operating on a block chain and increasing the efficiency and cost of a transfer make great sense to a dumbo like me. The speculation and hype around some of the other characteristics of crypto I will leave for another time, I oscillate on this.
Speaking of which, the number of Gold ounces per Bitcoin has just gone to a multiyear high.
Just in case you thought Bitcoin was volatile, along came Tesla.
S2N Screener Alerts
Skipping today.
Performance Review
For those who are new to the letter, the shading is Z-Score adjusted so that only moves bigger than usual for the symbol are highlighted.