The RVP Weekly Hack April 14th - Real Vision
The RVP Weekly Hack April 14th Information overload drowns out what is relevant. The RVP Weekly Hack draws upon the expertise of the Contributors to Real Vision Publications and cuts straight to the most important issues and investment opportunities. Here to keep you ahead of the market.
If You Look At Only One Chart… Time is short, so here is one chart to get you thinking in a new direction.
Net short speculative positioning in eurodollars has never been more extreme.
Everyone is betting that short-term interest rates are going to rise. “If everyone is thinking alike, then somebody isn’t thinking.” George S. Patton
Right Here, Right Now The best trading ideas of the week from RVP Contributors
Buy Eurostoxx, Sell S&P Says View from the Peak US equities have outperformed European equities by ~50% over the last three years, leaving US equities trading at about a 20% premium to European equities. Scene set for the largest asset allocation shift in six years? Central bank largesse has left too much money chasing too few assets. Equities, and specifically US equities, have been the biggest beneficiary. With European growth and inflation on a more solid footing and the US economy looking vulnerable to a (at a minimum, cyclical) top, it may be time for European (vs. US) equities to shine. Throw in a potential political impasse from the new Trump administration, and you have a catalyst. View from the Peak presents his thesis for being long European equities/short US equities. JDI Research held a very similar view in her incredible research report at the end of last year.
The Big Call Legendary hedge fund manager Stanley Druckenmiller said when you see something in the market that really, really excites you, "Bet the ranch on it." These are the Big Calls, the investment themes that can make or break you. Think differently from the crowd and have a different time horizon, and you have an edge. RVP, with its crack team of financial minds, identifies the Big Calls and guides you through the investment opportunities when they present themselves.
Is Reflation Deflating? Is one of the biggest reflationary episodes of the last 20 years coming to an end? Reflation has been the buzzword of late. Many have attributed reflation to Trump, but the reality is that this trade started well before Trump hit the jackpot. Trump did give the reflation trade an extra leg up as the market anticipated the inflationary impact from fiscal policy and tax reform.
Reflation has lifted all boats, but the biggest beneficiaries have been EM, commodities, and banks –all the stuff that has been on its knees for many years, pulled down by a strong USD and global deflationary impulses. The biggest loser from reflation has been bonds. Bonds yields have seen some of the sharpest increases in % terms in history. In fact, historically, when yields have risen in % terms as fast as they have this time, that rise has typically presaged a recession. IF the reflation trade is unwinding, there are a few ways to play this. On the long side go long US Treasuries. Long TLT ETF would be another expression of this. Time to short EMB, the EM bond ETF, or short XME, the metals & mining ETF, and short XLF or KRE, bank ETFs. For more on the reflation story, JDI Research and MI2 Partners share their insightful views.
Are You On This Yet? In such a fast paced world staying on top of relevant market news and developments is tough. RVP scours the globe for the most interesting stories and distils them, keeping you ahead of the crowd.
India Blazing The Technology Trail The biggest technology revolution is one that no one has heard of. A technology revolution is happening on a scale never seen before. We are not talking about one company but about a whole country – and it’s the second most populous country on the planet. Companies that create massively outsized technological breakthroughs tend to capture the investing public’s attention and start to trade at huge valuation multiples as future growth is extrapolated. But what happens when it’s a country and not a company? How do investors capture these potential outsized returns?
Raoul Pal shares his latest thoughts on India, potentially the most attractive major investment opportunity in the world. It is all about something called Aadhaar. India has just built the world’s first national digital infrastructure, which is going to make India one of the most technologically advanced nations in the world. Raoul casts his eye over some of the best investment opportunities.
Can Volatility Be Suppressed Indefinitely? Risk cannot be destroyed; it can only be shifted through time and redistributed in form. The world and his wife are short volatility. This has been the trade that has just kept giving. This is effectively a yield-enhancing strategy where you make money when volatility declines. Its popularity is prolific and has sucked in everyone from pension funds starved of yield to risk parity funds, hedge funds, and retail investors. Pension funds require 7–9% returns to meet their liabilities. In a world of recordlow interest rates resulting from central bank suppression, these funds have no option but to short volatility for the yield pickup. The Retirement Crisis is a theme that will play out over the next decade, but that is a story for another day. Even central banks and governments have a vested interest in suppressing volatility, because that is a way to prop up markets. Given that everyone is ‘all in’, losing control of equity markets is simply not an option.
Can volatility really be postponed indefinitely? That was the view by many in the market in 1987 – until markets fell 20% in a day and VIX spiked to 150! VIX has just broken through the 200 DMA for the first time in 2017. The 200 DMA is considered by many to be a good barometer for a potential longer-term trend change. If we really are moving to a new period of higher volatility, the transition is unlikely to be smooth. The volatility environment we find ourselves is best articulated in Artemis Capital's Volatility and the Allegory of the Prisoner’s Dilemma. Their newsletter, even though dated, is essential reading for anyone trying to understand volatility.
If You Look At Only One Chart… Time is short, so here is one chart to get you thinking in a new direction.
Net short speculative positioning in eurodollars has never been more extreme.
Everyone is betting that short-term interest rates are going to rise. “If everyone is thinking alike, then somebody isn’t thinking.” George S. Patton
Right Here, Right Now The best trading ideas of the week from RVP Contributors
Buy Eurostoxx, Sell S&P Says View from the Peak US equities have outperformed European equities by ~50% over the last three years, leaving US equities trading at about a 20% premium to European equities. Scene set for the largest asset allocation shift in six years? Central bank largesse has left too much money chasing too few assets. Equities, and specifically US equities, have been the biggest beneficiary. With European growth and inflation on a more solid footing and the US economy looking vulnerable to a (at a minimum, cyclical) top, it may be time for European (vs. US) equities to shine. Throw in a potential political impasse from the new Trump administration, and you have a catalyst. View from the Peak presents his thesis for being long European equities/short US equities. JDI Research held a very similar view in her incredible research report at the end of last year.
The Big Call Legendary hedge fund manager Stanley Druckenmiller said when you see something in the market that really, really excites you, "Bet the ranch on it." These are the Big Calls, the investment themes that can make or break you. Think differently from the crowd and have a different time horizon, and you have an edge. RVP, with its crack team of financial minds, identifies the Big Calls and guides you through the investment opportunities when they present themselves.
Is Reflation Deflating? Is one of the biggest reflationary episodes of the last 20 years coming to an end? Reflation has been the buzzword of late. Many have attributed reflation to Trump, but the reality is that this trade started well before Trump hit the jackpot. Trump did give the reflation trade an extra leg up as the market anticipated the inflationary impact from fiscal policy and tax reform.
Reflation has lifted all boats, but the biggest beneficiaries have been EM, commodities, and banks –all the stuff that has been on its knees for many years, pulled down by a strong USD and global deflationary impulses. The biggest loser from reflation has been bonds. Bonds yields have seen some of the sharpest increases in % terms in history. In fact, historically, when yields have risen in % terms as fast as they have this time, that rise has typically presaged a recession. IF the reflation trade is unwinding, there are a few ways to play this. On the long side go long US Treasuries. Long TLT ETF would be another expression of this. Time to short EMB, the EM bond ETF, or short XME, the metals & mining ETF, and short XLF or KRE, bank ETFs. For more on the reflation story, JDI Research and MI2 Partners share their insightful views.
Are You On This Yet? In such a fast paced world staying on top of relevant market news and developments is tough. RVP scours the globe for the most interesting stories and distils them, keeping you ahead of the crowd.
India Blazing The Technology Trail The biggest technology revolution is one that no one has heard of. A technology revolution is happening on a scale never seen before. We are not talking about one company but about a whole country – and it’s the second most populous country on the planet. Companies that create massively outsized technological breakthroughs tend to capture the investing public’s attention and start to trade at huge valuation multiples as future growth is extrapolated. But what happens when it’s a country and not a company? How do investors capture these potential outsized returns?
Raoul Pal shares his latest thoughts on India, potentially the most attractive major investment opportunity in the world. It is all about something called Aadhaar. India has just built the world’s first national digital infrastructure, which is going to make India one of the most technologically advanced nations in the world. Raoul casts his eye over some of the best investment opportunities.
Can Volatility Be Suppressed Indefinitely? Risk cannot be destroyed; it can only be shifted through time and redistributed in form. The world and his wife are short volatility. This has been the trade that has just kept giving. This is effectively a yield-enhancing strategy where you make money when volatility declines. Its popularity is prolific and has sucked in everyone from pension funds starved of yield to risk parity funds, hedge funds, and retail investors. Pension funds require 7–9% returns to meet their liabilities. In a world of recordlow interest rates resulting from central bank suppression, these funds have no option but to short volatility for the yield pickup. The Retirement Crisis is a theme that will play out over the next decade, but that is a story for another day. Even central banks and governments have a vested interest in suppressing volatility, because that is a way to prop up markets. Given that everyone is ‘all in’, losing control of equity markets is simply not an option.
Can volatility really be postponed indefinitely? That was the view by many in the market in 1987 – until markets fell 20% in a day and VIX spiked to 150! VIX has just broken through the 200 DMA for the first time in 2017. The 200 DMA is considered by many to be a good barometer for a potential longer-term trend change. If we really are moving to a new period of higher volatility, the transition is unlikely to be smooth. The volatility environment we find ourselves is best articulated in Artemis Capital's Volatility and the Allegory of the Prisoner’s Dilemma. Their newsletter, even though dated, is essential reading for anyone trying to understand volatility.
