In this Stockhead series, investment manager James Whelan from VFS Group offers his insights on the key investment themes and trends in domestic and global markets. From macro musings to the metaverse and everything in between, Whelan offers his distilled thoughts on the hot topic of the day, week, month or year, from the point of view of a professional money manager.
Ahhh, Day 1 of a week off. And by “week off” I mean arranging things with your eldest on the road so that you can check in on emails and messages every hour or so.
I’m not Superman and I still have a job to do. And with the market looking like it does it’s not very easy to stay away from the news too much. Even just so you can yell “WRONG!!!” at the podcast telling you why something went up or down.
Know who wasn’t wrong on a podcast? An old mate of mine David Pain on my BIP Show podcast on Friday last week. He’s a gun macro strategist and we’ve collaborated on a few things over the years. I used to serve his old man Jonathan Pain (author of the Pain Report) cold Coronas at the Glenorie RSL where I worked in 2004-5. Jonathan would give me easy investment ideas like “long oil on Chinese emergence as a dominant global powerhouse”.
I took that sort of stuff to my first broking job at Austock Securities and based my short time there on pretty much that. I did OK.
(Funnily enough, the moment a senior advisor asked me to look into “what subprime debt” means I knew I was happy to move on. I was way too green for hedge fund sales anyway.)
The similarities with then and now are numerous; none as much as the long oil thesis based on China’s re-emergence as a global economic powerhouse. I mentioned this last week and that there was a point in time to be long the black stuff, but just to wait because the chart looks toxic.
Here’s a fun thing. I took CL (Light Crude futures) and removed the price bars, leaving the 200 day, MACD and RSI. Without the noise of price you get a sense that a little more rollover will happen before the next leg.
Don’t go chasing waterfalls
So a bullet dodged there. As it was realised India and China were buying the cheap oil from Russia I think the dawning hit that sanctions have really only helped cripple the West.
On the show, David mentioned that energy is the great reverse-indicator for equity markets.
Easy to see how. The Fed can’t fight food and fuel prices with rates (that’s why they use the inflation gauges ex those things apparently) so the only thing rate rises were doing was squashing demand. If fuel (and therefore food) start to come off for other reasons, then the markets will take a breath on easing demand restraint from a desperate Fed.
Then you get yourself a Friday like last week and we’re off to the races.
Another great point made for you to watch out for in the coming months. Watch reporting. There WILL be re-ratings down. There will be profit downgrades. Keep an eye on the companies that you expect to be smashed after a downgrade that aren’t. Follow that buying.
If you’re surprised by price action like that then write the name down and get it on a watch list because there’s probably more buying behind it.
Smart guy that David…
See you in a week, stay safe and all the best,
James.
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