Elevation of Process over Substance (TWTW – Mar 7-11, 2022)

Elevation of Process over Substance – In my books, captures very well what many may be feeling (hopefully I am not alone in often times feeling that way in recent days, weeks, but also frankly years …). In any event, this “observation” was made in this video =>Click HERE! featuring Jim Rickards (NY Times bestselling author: The New Great Depression, Aftermath, the Road to Ruin, Death of Money, Currency Wars, The New Case for Gold).

The most important takeaway from my perspective, from the discussion, is that unfortunately we are about to find out the repercussions shortly … of everything that followed the “unprovoked” attack of the Ukraine on Feb 24, 2022, including, how the drastic sanctions imposed on Russia aren’t likely to be “contained” specifically to Russia. Bottom line could be, I am guessing … “brace for impact”.

Quite a week – yet again …

Inflation came in on target at 7.9% in the US => click HERE! at a 40 years highs … AND that was pre-war impact, which already is proving rather inflationary, gauging from the reaction of many commodities since the start of the conflict …

This picture here:

provides more colour around “inflation” (scary imo … but here you have it!)

US Treasury secretary Janet Yellen, former head of the US FED, as we all know, was prompt to suggest the US economy remains strong, and unlikely to go into recession => click HERE! THAT, could be a premature pronouncement, but at this point, it may just be one view among very many. I guess something to keep in mind is that Europe, for all intents and purposes is going to have a rather difficult time not ending up in a recession itself … Perhaps that goes some way toward explaining this picture:

 

which looks at flows out of European equities … (if you’re a contrarian … pay notice 🙂

How does one create “value” out of a transaction (a stock split 20:1) that supposedly doesn’t actually add any?

Ask Amazon, which announced it would split its stock 20:1, news of which sent the stock higher. Implication? Well, I am guessing aside from the “notion” that a cheaper stock prices makes “owning” a portion of the company that much more accessible … an important consideration is that it may pave the way for the company’s stock to enter the Dow Jones Industrial Average, which due to the arcane ways in which the index is weighted, could not have happened when the stock was at $3,000 a share. There you have it – the stock is more valuable on account of expectations of greater uptake/demand going forward => click HERE!

Oil – spiked on … Tuesday, as I recall, following news the US would ban imports of Russian Oil. The Russians were prompt to note that any such restrictions/sanctions may end up with oil prices spiking toward USD 300/barrel …

Click HERE!

Oil in CAD ( a CAD which apparently has become “inversely” correlated to oil … go figure …):

 

Talking about Oil, this past week saw the Oil Industry converge on Houston for their annual CERA Week conference. Amongst others, Cenovis and Suncor were there, and CNBC interviewed Suncor’s CEO Mark Little => click HERE!

What is most fascinating to me of late, is news that the Biden administration seems keen to coax Iran and/or Venezuela to step up to the plate (to make up for that lost Russian oil import source …) YET keep failing to make much if any mention of their next door neighbor (and strong ally through history) – CANADA … What is that all about?

During the interview above, while explaining why Keystone XL isn’t likely to be restarted any time soon, Suncor’s CEO makes reference to Canada having some additional export capacity via Rails.

While on the topic of Oil, worth noting that Warren Buffet got himself into a large Occidental Petroleum position, which he looks to have built up further this past week … => click HERE!

Is that (what Mark Little suggested as far as rail capacity to ship additional crude to the US) what attracted Pershing’s Bill Ackman as he disclosed he had just gotten himself back into a CP Rail position ? Click HERE!

Now as Jim Rickards in the video above highlights, the sanctions imposed on Russia are the most draconian sanctions ever applied on any country, and the speed at which they have been imposed probably is also causing many heads to spin … Evidence they must already have a massive impact? The Russian Rubble has cratered, and Russian equity markets haven’t re-opened. THAT + Russia ETFs have all ceased trading, and BlackRock indicated that this whole thing was costing them (Their investors … actually ) some $17 Billion in terms of the impact of Russian equities pretty much being marked down to … no market … ouch! Click HERE!

the US Energy Minister – by the way – (so sorry, I must go there …) seemingly finds the whole Oil related mayhem amusing => Click HERE! and yet … renders the whole US attitude toward Energy, and more specifically perhaps Canada even more puzzling … in that she was born in … Vancouver, British Columbia … oh boy!

While on the commodity “space”, two things worth paying attention to:

  1. Renowned investor Jim Rogers anticipates the mother of all bear markets => click HERE! for equities
  2. Here is Calgary-based CTA firm Auspice’s latest slides deck in case you want to consider “access” to an asset class / strategy that ought to be meaningfully more helpful in this inflationary environment we are in than bonds => click HERE!
Auspice Commodity to Complete Solutions Mar 2022

Oh and … Ninepoint did indeed launch their Energy Income fund/ETF this past Monday (NRGI => click HERE!).

Other:

  • Strong Employment numbers in Canada => click HERE!
  • DocuSign continues to crater => click HERE!
  • Masha Gessen’s views are worth a read, regarding one Vladimir Putin => click HERE!
  • BMO held a webinar this past week, looking at Infrastructure, Real Estate, and ALTS etc => Institutional Alternative Risk Premia March 22
  • BMO and Brookfield, as you likely know have just launched two ETFs – giving you access to Real Estate, as well as Infrastructure => Click HERE!
  • Germany … is apparently ressorting to … Coal these days … Now THAT – isn’t helpful to reducing Emissions … just saying … and recently, BTW, one Elon Musk called for renewed Nuclear Energy production … Guess one is pragmatic, the other unfortunately was more focused on process than substance … and UNFORTUNATELY, at the moment, we are very much in the throes of what likely will be many unintended consequences …

Be careful out there …

Factors / Thematic / Sectors performance:

  • Combo of Energy and Materials being outperformers, while Tech continue to suffer = Fundamental and Value, as well as Min Vol continue their outperformance vs VCN

  • haven’t looked at volumes … but Thematic sell-off looks to be calming down, except when looking at ARKK, which again weak this past week …

  • Defensive tilt toward utilities; REITS, and staples last week against the backdrop of continued uncertainty associated with Russia’s aggression in the Ukraine

 

YTD Sector / Thematic / Factors performance:

  • Same YTD sector performance picture as last week: Energy and Materials strong … everything else, not so much, with Financials having paused, after strong bank results, but presumably on concerns re: economic outlook overall

  • Pronounced correction since the turn of 2022 across the “Thematics” space, with notable outperformance from Cyber, versus underperformance from Blockchain, as well as Metaverse
  • ARKK continues to get hit hard … no matter its founder’s latest pronouncements regarding strong returns going forward => click HERE!

  • Several factors, notably fundamentals and value (as well as min vol) continue to outperform Canada’s main index exposure (proxy’ed here by VCN)

 

Of note – Canadian market significantly outperforming, and conceivably well positioned to continue to do so – given materials/resource exposure, as well as resilient financial sector. Whereas Canadians are generally admonished to diversify beyond their home bias, the current crisis, as well as even Canada’s positioning in the context of a 2022 economic reopening, suggests that now might be one of these unusual times when looking at our home market makes sense …

Coming up this week: US FED tightens by 25 bps is pretty much consensus …