18 Nov 2021

Stocks only go up magician Dave Portnoy with DDTGG isn’t enjoying as much magic as he did back in the day. I have to confess I was obsessed with Daves twitter feed. The entertainment value was sky high if you like cocky, coked up self promoters with a knack for using common sense with abrasive commentary to connect with Joe public.

His greatest act was the magic he performed with the Penn stock after selling his sports betting business for stock. I started watching just before the Covid selloff I saw his wealth get hammered in March April last year and then things got wild. Penn went from a $4 stock to a high of $141 finally getting included in the S&P500 and his net worth was in the hundreds of millions and he became a regular on CNBC, Bloomberg and the rest of them. He was everywhere. He even conducted an interview with Trump at the White House a sitting President not bad. Currently trading at $54 it is more than 60% off its highs and Dave is just another one of those loud mouths. We are at a support level which I don’t see holding. Goodbye Dave have a nice life.

This reminds me of Rivian that EV automobile poster child of the markets excesses. It was down 15% yesterday, there is still lots of air to release from this bubble.

Commonwealth Bank’s share price took a smack yesterday down 8% with results suggesting a narrowing of margins. With earnings multiples of the sector trading at 25 yr highs pre provisions, you can see that pricing hasn’t left much room for “misses”.

I read about Henry Kissinger speaking at a Bloomberg Economic summit in Singapore. I thought they were quoting him frankly I though he had died ages ago. It turns out he is 98 and still on the talking circuit. He is definitely one of those diplomats who has a knack with words. He quoted German philosopher Immanuel Kant who said 200yrs ago, “peace can be achieved at some point in humanity by insight or by catastrophe.” He was referencing the tension between the worlds 2 super powers USA and China. It feels like on the surface there is some playing nice but I wouldn’t get too comfortable.

When you read the big boys being quoted that the market has gone a little dilly you need to move into DEFCON mode. You have Goldman’s CEO Solomon saying “Market Greed is Now Outpacing Fear”. You have Bill Gross coming out of his yoga lotus pose to say the central banks are now snookered. There are other big names like Larry Summers calling out central banks. I have to say as someone in love with the markets this is theatre of the finest form. I wish Richard Russell was still around to absorb all the action.

I see the department of energy is expecting the cost of energy in the US to rise 54% this winter. I understand there are major shortages of GAS which is putting upward pressure on prices. I can also see that these higher energy prices are more supply driven than demand. Keep an eye on Brent Oil its below its 5o day moving average and is about to hit its upward sloping trend line. A break of this trend spells further weakness.

While I am fighting the whole Inflation complex, I believe it is present and likely to be for some time, I just remain unconvinced that the demand is there to support it growing into something “hyper”. I could be wrong because of the large amount of saving buildup, the other factors being quoted like shortages of people and supply are more transitory in my book. The thing that is worrying me is the inflation that will come from the transition to a more energy efficient economy in 2050. The sector is very under developed lacking in skills and infrastructure so costs associated with 2050 carbon readiness will be costly. Which leaves my biggest fear for inflation. If the mindset gets stuck on inflation then we will start to build inflation expectations into our future pricing this will be very inflationary and negative.

I am under the pump at the moment so not getting much time to analyze the markets as much as I like to. I am also playing with some new ideas on formats for this letter to make it maybe a little more productive. Till the next time.

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