Time to think out of the box 💡

25 mai 2022

INVESTMENT CONTEXT

• Equities failed to sustain May 23 uptick, with bears firmly in control of the market sending Nasdaq in the low 11k bracket
  
• U.S. retailer Best Buy (BBY) missed EPS forecasts, but downplayed recession fears
  
• S&P Global’s Composite Purchasing Managers’ Index (PMI), a measure of the services and manufacturing industries, fell to 51.8 in May, its lowest level since February 2021; meanwhile, new home sales in the U.S. fell 26.9% on a yearly basis
  
• At Davos, Davos, George Soros remarked that “Indeed, the Russian invasion may turn out to be the beginning of World War III, and our civilization may not survive it“
  
• After taking a leading role in Netflix (NFLX) one-day 30% slump, hedge fund manager Bill Ackman tweeted "Inflation is out of control (...) Markets are imploding because investors are not confident that the (Fed) will stop inflation. If the Fed doesn’t do its job, the market will do the Fed’s job"
  

PROFZERO'S TAKE

* Tensions in Ukraine remain high after Russia's capture of the port-city of Mariupol. As EU's resolve is being tested by the concerns of some member States (Hungary in particular) on energy security, analysts see the conflict in Donbas dragging in a protracted war of attrition. ProfZero hasn't failed to notice the regained momentum of RUB in the wake of the growing fringe of European energy companies bowing to Moscow's request of supplies being paid in its own currency - yet the catch 22 is becoming thornier by the hour now that soft commodities vehemently entered the picture, escalating the crisis to a global level
* Russia may in fact be nearing default, as the U.S. Treasury Department said it would end as of May 25 a waiver that allowed Russia’s central bank to process payments to bondholders in USD through U.S. and international banks, on a case-by-case basis. The first tranche of interest on debt is scheduled for May 27, when EUR 100mln are due on two bonds. ProfZero has long been reporting the eventual default of Russia as a further aggravating catalyst to the overall macro scenario - now that the moment of truth nears, ripples from the eventual default also must be accounted for, starting from the consequences to soft commodities
* Buffett binging on U.S. equities while Soros calling the possible end of our civilization. Coincidence? As much as Bill Ackman, ProfZero only believes in the inescapable, cold efficiency of the market. Greed has all it takes to eat inflation's lunch
* ProfZero is starting to feel uneasy about the prolonged range-bound trading pattern drawn by BTC. Whilst impressed by the resilience of the entire blockchain space to the broader turmoil, and even more so by the rebound after LUNA's demise, ProfZero argues the current trading structure conjures fears of sudden, major drops should bears launch a short attack on the segment (much akin to the meltdown on April 29)