IC Speaks2 Mins Read

They Are Not Even Pretending Anymore!

by Thomas Meichl

21st January 2020

Advisory Letter: 21st January, 2020

On my way to work yesterday I read an interesting news piece in the WSJ: “Hedge Funds could make one potential Fed Repo-Market Fix hard to stomach.”

The essence of the article (in addition to a good video explaining the Repo Market) is that the Fed is considering opening the FICC Repo clearing facility also up to Hedge Funds. This is helicopter money for Wall Street. Yay, stimulus!

I am not in a position to recommend anything here, because I am starting to sound like a disgruntled perma-bear. Instead, I will share some charts to put things into context:

advisory-letter-kristal

And the Fed’s balance sheet:

I am not saying it’s time to sell everything and hide in a nice place for a year, but its worth thinking about some insurance in your portfolio. For the ones fully invested, get some cash on the side or buy downside protection. If you have cash, don’t rush into chasing the move. Increased allocation to Gold was one of our themes since the middle of 2019, and now that we have eased off the extreme levels post-Iran, Investors are starting to wonder if this is the dip worth to buy into.

Lastly, a chart about the current long positioning. 3 of the 4 spikes since 2012 to the same levels as today, have been followed by a 5-20% correction.

But enough of this, for now, I do not want to scare anyone here. Instead, let me just end with the wise words of John Templeton:

“Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”

All the best,

Thomas Meichl

Disclaimer

The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.