siam-mbk
26
Oct

An Ideal Day To Catch Up On Markets, Sleep, And Other Things Of Great Importance

Today marks the cremation ceremony for the late King of Thailand, aka the most important day in the country. The entire city is clad in black like you’d never believe. Perhaps easy to visualize, but witnessing in person an entire city of black feels rather unreal. If you don’t intend on joining the throng of the million+ people gathered outside, stay home, because nothing will be open.

There is no better way to spend a day like this reading and reflecting, trying to get back in tune with the markets. This past week, I reduced portfolio holdings, selling out of OLED at $135.20 and CAFD at $15.61, a fortuitous move in hindsight as both are trading much lower now. With the proceeds, I added to PEGI both at $23.12 and more at $22.72, and will continue to add if it drops lower. Currently, PEGI is my one and only holding, and is trading like shit – getting kicked lower on a daily basis. That said, I can say with confidence that there is a bid in this industry, one that is just developing and will play out in terms defined by years.

Tech, Pharma, and all other high-beta ‘bubble’ stocks are hitting the proverbial ceiling, and although I do not believe we are on the precipice of complete and utter collapse, I wouldn’t be a buyer here just yet. On the surface, an air of complacency still surrounds most investors, but there are indirect hints suggesting a gradual move to a risk-off environment. To be certain, there is nothing wrong with the growth companies driving tech and innovation – they are stronger than ever before, but stocks prices aren’t determined by valuation and stories, but rather by supply and demand.

There was a time not too long ago that movements in TLT and GLD would serve as reliable ancillary indicators as to where money was flowing, but nowadays they have little to no relevance and have been nothing more than dead money. Rather, stocks like NVDA and BABA are a better representation of market health, and allocation models during risk-off phases have moved away from the traditional low P/E stocks to include momentum names, making it difficult to sense emotions.

What’s most curious to me, is the subtle but steady flow into energy – namely the mega-cap space. Big Oil and Energy clearly have a bid, and this time round it is not supported by higher oil prices. My instincts tell me that alternative energy is the new trend slowly being embraced, and Big Oil is best positioned and invested to lead should that thesis prove to be correct.

Another part of me tells me that the theme of short retail/long tech that dominated most of 2017 is coming to an end as over-zealous investors, myself included, have gotten too complacent, expecting higher and higher prices. The next lasting trend to emerge is still obscure, but what is certain is that it will be something unexpected, and will remain neglected until it has already fully developed.