Santa … Santa? (TWTW – Dec 13-17, 2021)

Santa … Santa? 

Well, Markets still hate uncertainty … or conversely crave predictability …

So Jay Powell, who on Wednesday signalled a ramped up pace as far as winding down asset purchase, also in the process indicating that the US FED expects to raise rates 3 X in 2022, it turns out … a) can’t remove all uncertainty, and b) isn’t Santa (otherwise, where is our Santa Rallye?, Please).

Anyways, markets initially reacted well to the clearer path ahead as far as the FED, only to give back gains as Tech Mega Cap melted Thursday, before stabilizing on Friday (NASDAQ is pretty much flat as I write).

Naturally, as you too can observe, we have a few dynamics at play that are causing some anxiety:

  • Inflation numbers – have obviously come across as a bit of a shocker – whether or not they are predominantly dictated by supply chain constraints / issues. In Canada, by the way, apparently a chunk of inflation (that pertaining to inflation experienced in the second hand car marketplace) has been missing from the calculations, suggesting Canadian inflation is much closer than that of the US (6.8%) versus what was reported (4.7%). Scotia’s economist takes issue with Statscan over this situation => Click HERE!
  • Interest rates – are moving up (the BOE in a surprise move this week actually raised their O/N rate)
  • Omicron numbers are skyrocketing (for some reason always dreamed of using that expression lol. now done …). Yes, you’ve read it too – Omicron is even more contagious than the earlier Delta Version of COVID-19. THAT, obviously it not good. That said, today, the news seemed to suggest that the symptoms are very much cold-like … And with that, presumably, a market which was poised to open with stocks under pressure, is holding up better than the open suggested. BTW – if everything about OMICRON is “cold-symptoms” like … could it actually just be a cold? Does it have to be COVID-19 …? Shutting everything down again appears to be so … unnecessary … BUT for now … let’s freak out, why don’t we? it seems politicians enjoy the power of telling us all that the world is ending … maybe it makes them feel more empowered than their otherwise poor showing on many fronts suggests …

What else is/was worth noting this past week?

  • MCD – Nice to see MacDonald clawing back $105 Millions!!! from the CEO it fired not long ago (not chump change relative to the average worker’s salary at the burger giant …)
  • ARK Invest – been a really tough 6 weeks or so for Cathie Wood and her team, gauging from their flagship fund’s performance. Also, a performance review from Morningstar presumably didn’t help the overall case, as it spelled out clearly that while ARK’s numbers look very good still from a longer term perspective, the fact is that as the majority of the $$$ came onboard AFTER the spectacular 2020 performance, a lot of these $$$ are actually not benefiting from the longer term numbers, but rather suffering from 2021’s losses
  • JPMorgan – Now … THAT’s a fine – USD 200 Million fine for JP Morgan for allowing employees to use What’s UP … Like I said, that’s a fine. Guess the regulatory side in the US has got bigger teeth than up here in Canada … where … the Auditor General slammed the OSC for dragging their feet on embedded compensation issue, costing Canadians over $13 Billion in fees in the process …
  • Turkey – seems to be unravelling precipitously, gauging from the fact that I read somewhere earlier today that Gold in Turkish Lira terms has risen … what was it? around 80% in 2021 (so I guess Gold is rallying somewhere after all …)

Bridging Finance – for a firm that touted itself as never having had to take provisions, respectively book a loss … well, I guess the initial read => Click HERE! from the appointed auditor into this mess … indicates that the minimum loss looks like CAD 580M. Ok … so the niche you thought you’d tapped into is turning out to not exactly having had the kind of potential or risk attributes you thought … ouch!

ETFs this past week:

Getting back to the “Thematics” side of the equation, I tuned into a Pro-Shares Webinar earlier this week, looking at the category, and providing some decent insights and good perspective on the topic. If you missed it – Click HERE to access postview!

Evidently, not all “themes” are created equal, not all unfold according to plan alongside the desired time line, and as Ben Johnson (from Morningstar) likes to remind investors, success on the Thematics side is predicated on a couple (three I think is what Ben likes to cite) factors, namely:

  • Identifying the correct theme
  • hoping to have identified the correct names that will benefit from same
  • hoping (again) that buying into the theme didn’t happen at prices already fully reflecting the potential of the theme, or worse, buying the theme at extremes (high prices), on their way to … unfortunately lower prices, whether or not the theme did or didn’t have merit …

Some pics from ProShares webinar that I think worth keeping in mind:

these are: 1) the actual sales growth (underpinning the “stories”); 2) the actual YTD performance of the themes ProShares keeps an eye on and finally 3) the areas the audience expressed interest in, looking at 2022:

Sectors:

 

  • The defensive of the equation arguably dominating performance-wise, this past week …
  • Energy – evidently not being helped by renewed shutdown-type measures … (International travel curbed in Canada, etc)
  • Financials/REITs a relative “safe – haven”?

Themes:

  • Travel – continues to be hurt by Omicron – however on a perhaps slightly more positive note, outperformed on Friday, effectively closing the week on a more optimistic note (presumably related to news pertaining to “real” threat level presented by Omicron
  • Clean Energy – notable pullback of late
  • ARK – up w/o/w, but significant intra-week volatility …
  • Genomics – outperforming alongside healthcare … = still slightly negative YTD, and lagging the latter meaningfully over that time span. Catch-up in 2022? Having gone effectively nowhere in 2021, that ought to be a possibility, as presumably “progress” continues apace on that front …

On another note – obviously with inflation very much on everyone’s mind, people are having to revisit what works/doesn’t work when it comes to providing some offset to a more “inflationary” environment. Commodities are an area worth exploring, in my opinion, but one where many lack the necessary knowledge (I include myself in the category …), respectively the tools to implement. One solution worth a look/considering:

COM – Click HERE for a visual as far as explaining what COM is about.

Finally … I am sure we’ve all heard the warning against “catching a falling knife”. Heck, some of us likely have, on occasion, made that mistake … So here, I was intrigued earlier when I came across an ETF solution looking at (presumably …) how to tackle that task, without getting badly cut (again presumably). This ETF, by the way, trades in the US under the apt ticker NIFE. So how had it been working, you might ask?

Well, looking at the chart here:

I’d have to say … well, it would depend on when you tried to grab a hold of it, but overall, not so well of late …

BUT – it is a diversified way of catching some stocks which presumably have themselves gotten quite a bit cheaper price wise in recent past. To learn more => click HERE!

How do I feel about it? well, in an expensive market the breadth of which has only deteriorated, looking at buying stocks when they go on sale does have obvious appeal. The risk with that strategy is – obviously – depicted in the chart, namely that while the stocks have already corrected sharply, presumably they can keep doing so, which they evidently must have done. Do better times lie ahead … Stay tuned. One way, I guess, of playing the “value” angle.