Merry Christmas. Happy Hanukkah. Happy Holidays. Happy New Year. To you and your families. Resurrected one of my favorite little memories, an opening note from Christmas past…
Christmas Day 2013: “Santa slipped down the chimney. Left big boot prints in the ash that spilled across our hearth. And the jolly fella stuffed stockings. Built a train set too. Sprinkled magic everywhere. Moments before the kiddies emerged, sporting their finest bedhead, Santa lit candles, warming our chilly pre-dawn living room. And hours later, as Mara and I basked in the Christmas morning afterglow, Osama bin Charlie (4yrs old), filled with sugar and spice, turned to his big brother. “Hey, you want some of my crap?” he asked, and threw a rubber eraser at Jackson’s head, officially ending our Christmas.
Dusted off an anecdote from 2012 about a late-night walk through my hometown, NYC. A little American magic (see below). Be back in early January with full weekend notes.
Week-in-Review (expressed in YoY terms): Mon: Yellen says infl will fall significantly and recession not necessary to bring down infl, Turkey / Russia discussing expansion of the grain corridor deal, UK power prices hit a record as cold weather continues across Europe, oil tanker backlog near Turkey starts easing, China removes mobile app that tracks HK residents’ travel history, China MOF will issue 750b RMB of special gov’t bonds to stimulate growth, WSJ’s Timiraos highlights division amongst FOMC members, Japan PPI 9.3% (8.8%e) / Machine tool orders -7.8% (-5.5%p), UK IP -2.4% (-2.5%e) / mfg prod -4.6% (-5.4%e), China New Yuan Loans 1.21T (1.4T exp) / M2 12.4% (11.7%e), S&P +1.4%; Tue: US CPI 7.1% (7.3%e) / Core CPI 6% (6.1%e), SBF arrested in Bahamas after US filed a criminal indictment, S. Africa parliament votes to NOT proceed with impeachment proceedings of Ramaphosa, EU agreed to approve Hungary’s pandemic recovery plan and reduce the amount suspended due to corruption concerns after Hungary dropped opposition to the EU/Ukraine aid package and a minimum corporate tax, US NFIB 91.9 (90.5E), S&P +0.7%; Wed: Fed hikes 50bps as exp / median DOT implies 5.1% for end of 2023 (more hawkish than exp) / ‘financial conditions should reflect policy restraint’ / wants to see ‘substantially more’ evidence of infl easing than the past two meetings, media report suggests BOJ to conduct policy review next year, Germany announces higher than exp bund supply, SBF faces up to 115y in prison if convicted of all 8 charges, Biden signs same-sex marriage bill into law, Kyiv suffers drone attack – first time in weeks, UK CPI 10.7% (10.9%e) / Core CPI 6.3% (6.5%e) / RPI 14% (13.9%e), Sweden CPI 11.5% (11.6%e) / CPIF 9.5% (9.6%e), S. Africa CPI 7.4% (7.5%e) / Core CPI 5% (5.1%e), EU IP 3.4% (3.3%e), US impt prices 2.75 (3.2%e), Russia 3Q GDP -3.7% (-4%e), S&P -0.6%; Thur: ECB hikes 50bps as exp (1/3rd of members wanted 75bp) / very hawkish message – “ECB is NOT pivoting”/ announces earlier start to QT than exp / signals series of 50bp hikes ahead, BOE hikes 50bp as exp / 2 votes for unch and 1 vote for 75bp hike, SNB hikes 50bp as exp / announced that the SNB has been engaged in buying CHF, Norges bank hikes 25bp as exp (signals close to peak), Mexico CB hiked 50bp as exp, US blacklists dozens of Chinese tech companies, US House passed stop gap 1w spending bill, Australia infl exp 5.2% (6%p) / emp chg 64k (19k exp) / unemp 3.4% as exp, China 1y MLF unch at 2.75% as exp / IP 2.2% (3.5%e) / ret sales -5.9% (-4%e), US emp mfg -11.2 (-1e), US ret sales -0.6% MoM (-0.2%e) / control grp -0.2% (0.1%e), US init claims 211k (232k exp), US Philly Fed -13.8 (-10e), US IP -0.2% MoM (0% exp), Israel CPI 5.3% as exp, S&P -2.5%; Fri: $4T US equity market option “triple witching” expiry – largest ever, US pushes for more transparency of debt African nations owe to China, Senate passes 1w stop gap spending bill, GS to eliminate 4k jobs, former Peru president Castillo to remain in custody for alleged crimes of rebellion, Argentina CPI 92.4% (94.2%e) / 3Q GDP 5.9% (5.8%e), UK cons conf -42 (-43e), Singapore non-oil expts -14.6% (-6.5%e), UK ret sales -5.9% (-5.8%e), Sweden unemp 7.2% (7.3%e), HK unemp 3.7% as exp, EU PMI flashes mfg 47.8 (47.1e) / serv 49.1 (48.5e) / comp 48.8 (47.9e), EU final CPI 10.1% (10%e) / Core CPI 5% as exp, US mfg PMI 46.2 (47.8e) / serv 44.4 (46.5e) / Comp 44.6 (46.9e), S&P -1.1%.
Weekly Close: S&P 500 -0.2% and VIX -1.75 at +20.87. Nikkei -4.7%, Shanghai -3.8%, Euro Stoxx +0.6%, Bovespa +6.7%, MSCI World -0.4%, and MSCI Emerging +0.7%. USD rose +11.9% vs Russia, +1.2% vs Sweden, +0.8% vs Bitcoin, +0.8% vs Sterling, and +0.2% vs China. USD fell -3.8% vs South Africa, -2.8% vs Yen, -2.7% vs Brazil, -2.1% vs Mexico, -1.1% vs Chile, -1.1% vs Ethereum, -0.7% vs Canada, -0.4% vs Australia, -0.3% vs Euro, flat vs Indonesia, flat vs Turkey, and flat vs India. Gold +0.3%, Silver +2.6%, Oil +6.8%, Copper +1.4%, Iron Ore -1.7%, Corn +2.0%. 10yr Inflation Breakevens (EU +10bps at 2.22%, US +10bps at 2.23%, JP +3bps at 0.84%, and UK -1bp at 3.64%). 2yr Notes +14bps at 4.32% and 10yr Notes +26bps at 3.75%.
YTD Equity Indexes (high-to-low): Turkey +108% pried in US dollars (+193.6% priced in lira), Argentina +32.2% priced in US dollars (+124.9% priced in pesos), UAE +21.4% priced in dollars (+21.4% in dirham), Chile +18.6% in dollars (+22% in pesos), Brazil +12.9% (+4.7%), Singapore +4.1% (+4.3%), Mexico +0.3% (-4.9%), Portugal -0.3% (+6.9%), Greece -3.8% (+3.1%), Indonesia -5.5% (+3.3%), South Africa -5.8% (+0.4%), Thailand -6.5% (-2.4%), India -7.7% (+2.6%), Denmark -7.9% (-1.9%), Norway -8.1% (+3%), Saudi Arabia -9.6% (-9.4%), UK -9.9% (+1.2%), Spain -10.9% (-5.1%), Malaysia -11.6% (-5.9%), Australia -11.9% (-4.5%), Canada -14.4% (-8.1%), Philippines -15.1% (-8.2%), France -15.2% (-9.1%), HK -16.3% (-16.3%), Euro Stoxx 50 -17.2% (-11.2%), Germany -17.6% (-12.2%), Switzerland -17.7% (-16.1%), Italy -18% (-12.7%), Netherlands -18.1% (-12.1%), Venezuela -18.2% (+167.9%), Czech Republic -19% (-16%), New Zealand -19% (-11.8%), S&P 500 -19.3%, Belgium -19.4% (-13.6%), MSCI World -19.7% priced in dollars, Finland -20.4% (-15.2%), Ireland -20.7% (-15%), Japan -21% (-8.9%), Russell -21.6%, Israel -21.7% (-12%), Hungary -23.2% (-11.3%), Poland -23.6% (-17.7%), Colombia -23.6% (-11.2%), Austria -23.7% (-18.7%), China -23.9% (-16.3%), Sweden -26.9% (-15.1%), Korea -27.7% (-22.3%), Taiwan -29.5% (-21.7%), NASDAQ -32.9%, Russia -39.9% (-43.9%).
Anecdote (July 2012): Took a long walk, to shake a long flight, Seoul to NY is a drag. Strolled through the World Financial Center, where a crazy mensch, gave me a shot, back in 1991. High above, floated two ghosts - Twin Towers - atop which, I held my little brother, upon my shoulders, whispering the truth, “Pete, you’re on top of the world.” That was 1993. In the distance, stood our Lady. Liberty. I spun, headed uptown. Meat Packing District, passed my brother’s nightclubs, filled with centerfolds, sprinkled with oligarchs, spraying Russian crude, and Cristal. Crossed Spring Street, the Shark Bar, where Mara and I marveled at our paper net worth, when I was dumb enough to believe you can get rich quick; but wise enough to not spend a dime, in 1999. Strolled through George Washington’s Park, teeming with Americans, Jews, black hats, Muslims, white caps, Atheists, Africans, Indians, Argentinians. Who come to earn Benjamin Franklins, leaving petty feuds behind. Hit Times Square, lit like a solar flare, where I sealed my biggest deal, with a handshake, midnight 2008. Glimpsed Bloomberg’s shining tower, our media mogul, he’s no Berlusconi, no Murdoch. Passed Russia’s Tea Room, where Martha Stewart and Sam Waksal, fittingly toasted themselves, committed a crime, did time – in 2004. Approached the Plaza, where dictators sleep, with their entourages of sycophants, when in need of a real doctor. Glanced up, at dark, empty, $10mm apartments, that Chinese kleptocrats buy, sight-unseen, by the six-pack. And at midnight, I hit Central Park. Alone. Passed The Met, guarding relics, from fallen empires. Circled the Reservoir, it’s safe now. Headed East. Where it started for me. In 1973. And sat on my elementary school steps, PS 158. Yellow cabs whizzed by. NYC aglow. Filled with potential. Energy. Opportunity. And wondered why the dollar remains just 15% above all-time lows.
Good luck out there,
Chief Investment Officer
One River Asset Management
Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, converse with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.