5 Jan 2022

In 2018 I read this book and was totally captivated by the story of a young Stanford dropout who was slaying the business world and was raising billions of dollars for her biotech startup called Theranos with the biggest names clamouring to join its board.

Yesterday Elizabeth Holmes was finally convicted of 4 counts of fraud. I have no doubt this women suffers from a very strong dose of narcissism.

Next on the list of false messiahs is the power of the “WE” duo Adam Neumann and his equally contrived wife Rebekah. I just finished watching the documentary of WeWork on Amazon Prime and could not stomach the contrived messianic tone of the narcissistic cofounder of a startup that he took to $47 billion in value in a very short space of time and within a few weeks back down to about $5 billion.

While I am writing about these charismatic leaders, I am forced to bring up the name Xi Jinping. While he certainly doesn’t score highly on the flamboyance he is certainly a strong leader. I know very little about epidemiology but I cannot shake this crazy policy idea of zero covid in the whole of China. We are starting to read disturbing reports out of Xi’an how the society is slowly starting to revolt after 10 days of stringent lockdown. I have a feeling their lockdown is nothing compared to the exaggerated memes on the internet about Australia’s severe lockdown.

The Covid is out of the bag and is popping up all over the country, Omicron is like whack a mole but even more prolific. I am sharing these stories as backdrop to the dangers of powerful dangerous leaders drunk on power. I might need to throw Vlad under the bus here to complete the picture, actually rocket man is also a good fit.

I am going to stick my neck out here as I have been doing for more than a month, China is the fly in the ointment. Watch how supply chain constraints wreck havoc on an already broken chain when half the country is in lockdown. We may just import a Covid Recession from the Covid manufacturers.

The market is pricing in 3 rate hikes for the year but there is now a 76% probability that there will be 4 rate hikes in 2022. In case you never realised it’s all about interest rates.

I was really surprised to read a report today from an Australian economist in shock that the AUDUSD didn’t trade stronger in 2021 on the back of the massive commodity run and the record exports from Australia. I think it is pretty obvious when the front end of the bond yield curve is much lower in Australia than the USA. Yes interest rates are everything.

Before the end of the year I was writing about the belting Magellan was copping for its under performance relative to its benchmark. I couldn’t help notice that Bridgewater the worlds largest hedge fund is also copping some rare grief from some of its large investors. Guess what their performance has been through this bullish period? Ok, let me help you, the Pure Alpha II flagship fund has made 1.6% per annum since 2012. No wonder Bridgewater has had more than 5 CEO’s over this period. I like Ray, not sure I want to be his hommie but the guy is smart as and principled (I hope that wasn’t lost on you, ping me if you got it 😉 )

It might be a good time to introduce the idea of a benchmark.

This is quite an amazing infographic. If you cannot read the text on the chart, the number of stocks reached 7,487 in 1995 and has subsequently fallen 42%. From 2010 to 2012 the number of indexes quadrupled and we now have a situation where there are more indexes than there are stocks. This is a big topic one I need more time and space to cover. I will however share a little interesting factoid that I discovered back in the days when I was into chess.

To keep it a little more practical than the abstractions one can get from the possible moves available from the start of a game, lets take a look after each player has moved a piece 5 times. There are exactly 69,352,859,712,417 possible games that could have been played. My point is that with 4,000 listed companies there are an infinite number of indexes that can be created, but now we have digressed – a lot.

Can you feel that I am still not really ready to talk markets in their current form. I think there are so many people on holiday around the world that I don’t want to draw too many conclusions from low volume price action, so lets end with something that is quite breathtaking.

I could not believe this when I saw it and it sure as hell explains the amount of egg I see on face in the mirror every morning. The largest drawdown for the S&P500 in 2021 was 5%. This was the year when stocks really only go up. This is the year when any long manager or investor was a hero. This is the year when the index went up 26.9% making its sharpe ratio an incredible 2.21. This is the year that is going to take some beating. I would hate to be starting my track record as long only manager now.

Ok I couldn’t resist here is another crazy chart I don’t know what to make of other than it being that time of the year. Spot prices of UK natural gas went negative, just when I thought we were having an energy crisis.


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