On the Highway to Sell?

Nick Ferres Vantage Point Articles

It has been a tremendous bull market in US mega-cap technology (FATMAN-G) stocks over the past few years. While outperformance was a function of the low discount rate and super-abundant liquidity, it was also likely due to superior cash flow, profits or returns on equity. The major US technology companies have also tended to have net-cash on balance sheet which …

Cold Gold

Nick Ferres Vantage Point Articles

Arguably the description of Gold as a “Barbarous Relic” might be even more appropriate in the post modern financial era of crypto and NFTs. However, gold has around 4000 years of financial history as store of real value against the devaluation of fiat currencies. More recently, a key point to note is that the spot price of gold still largely …

A Little More Defensive?

Nick Ferres Vantage Point Articles

The impulsive sector rotation and flattening in the yield curve following the June FOMC, highlighted crowded positioning in reflation winners and interest rate sensitive assets relative to “defensive” ones. Even prior to the FOMC, investor enthusiasm for “reflation” and “inflation” trades had probably already topped, consistent with peak liquidity, policy and cyclical growth momentum. The good news is that policy …

You Should Be Selling When they’re Yellen

Nick Ferres Vantage Point Articles

The 2013 taper tantrum had a profound impact on the psyche and behaviour of the Federal Reserve and markets. From our perch, it reinforced the observation that the Fed’s desire to create “stability” eventually leads to even greater instability in once there is a shift in future rate expectations and a withdrawal of liquidity. The prevailing bias that low short …

Hawk Talk

Nick Ferres Vantage Point Articles

For the first time, in a long time, the FOMC did not out-dove the market. While the prevailing bias was for the dot-plot median forecast to move higher, the increase to 0.625%, representing two full hikes by the end of 2023 was a genuine shift in the committee’s consensus beliefs. The key question is whether that is just a change …

There’s a Bear in There

Nick Ferres Vantage Point Articles

Something that has garnered attention recently has been the decline in the real (headline CPI adjusted) US earnings yield. Based on the forward earnings yield less the headline CPI, the real yield is now zero. However, if we use the current trailing earnings yield (1/29 = 3.4% – 4.2%) the real yield is now negative by 80 basis points. In …

The Tinkerbell Effect

Nick Ferres Vantage Point Articles

Following a rapid and emotional liquidation on Wednesday, there has been a solid recovery in the liquidity beneficiaries over the past 24 hours. As we noted yesterday, it is plausible that there has been a (tactical) peak in goods and commodity price inflation expectations. However, it is also our sense that the conditions for a secular rise in broad consumer …

The (Least) Ugly Truth

Nick Ferres Vantage Point Articles

As we often note, currencies are always a relative price. The focus over the past few days has been on the renewed weakness in the US dollar trade weighted index to new lows. However, from our perch, the recent wave of dollar selling has been driven less by domestic data and more by the relative trajectory of COVID amelioration and …

It is the Response that Counts

Nick Ferres Vantage Point Articles

The way price responds to news is always more important than the information itself. It is difficult to imagine a more bullish macro backdrop for equities. Monetary and fiscal policy is exceptionally loose (with the promise of even “more”) and liquidity is super abundant. Earnings growth and profits relative to expectations are near the strongest on record. However after an …

What if it all goes pear-shaped?

Nick Ferres Vantage Point Articles

The current prevailing bias is pretty bullish on risk assets. While we don’t have a quarrel with the way price has responded to news, it is still a valid exercise to think about ways to manage downside risk or hedge portfolios if there was a correction in risk assets. A simple way to do this is to manage how much …