21 Dec 2021

Yesterday Magellan the once top rated fund manager founded and largely run by Hamish Douglass got smashed by 32% bringing its total drawdown from its highs just prior to Covid19 to 75%. The dramatic drop yesterday was related to them losing their largest institutional mandate on the weekend. However, there has been a steady fall from grace as Magellan has taken a more cautious approach to the markets on the back of the corona virus (which I applaud) and less than stellar returns from its heavy bets on Chinese growth stocks.

There is a saying in trading be careful when catching a falling knife. I think Magellan has been overly punished so I started nibbling in my Ditto account with a few small purchases. Each new purchase I made was at a lower price. I anticipate more mandates being pulled but I believe their cautious approach will in the end pay handsome dividends when they start pulling ahead of many of their more cavalier competitors.

Speaking of which it is interesting to see how the CNN fear/greed index is reading the markets at the moment.

CNN

You may recall me talking about the ridiculous valuation placed on the new electric vehicle (ev) company Rivian. Well overnight the share price dropped another 7.9% taking it below their IPO price and trading at $90 it is a 50% drawdown from its post IPO high last month of $180.

Hat tip to The Market Ear for the next statistics about the last two times the Fed executed an orderly hike schedule:

•12/15 – 12/18 (from 0.25% to 2.5%)

•6/04 – 8/07 (from 1% to 5.25%)

SPX during same times:

•12/15 – 12/18: +23%

•12/04 – 8/07: +29%

Finally I noticed Chinese Estate Holdings shares tumbled 35% as it failed to get support to go private. I believe there is a lot more to worry about in the Chinese property market. The Chinese banking authorities have cut interest rates and started a cutting trend while the rest of the world is tightening. Something is a miss – hmmmmm.

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