2nd of June 2021

I am convinced that one day things will get better. One day we’ll be talking about markets, stocks, mergers, acquisitions, companies that will revolutionize the economy because they’ll sell dog food on the internet or invent an electronic currency that goes to a billion. One day we’ll get excited again about what’s happening on Wall Street and we’ll find that Jordan Belfort is so cool. But for now we have to digest the post-COVID recovery and its phantom inflation and I swear, I’ve eaten cheese fondues drizzled with hot chocolate with mussels as an appetizer that were much more digestible.

We take the same and we start over

I’m not going to lie to you, yesterday was a bit like Groundhog Day on Wall Street. Groundhog Day is that movie with Bill Murray where the guy wakes up every morning on the same day and can never get out of it until he has the perfect day. Well, we’re not happy because it’s not done yet, the perfect day.

Yesterday started well, as Europe was going crazy and hitting all-time highs in some places because the Chinese economic figures were encouraging and the recovery seemed to be going too well. And then the Americans, coming back from the weekend, were “monster euphoric” and also headed for the all-time high. When all of a sudden…

Yes, when all of a sudden, we realized that, according to some economic reports, we were more or less running out of everything and that soon no one would be able to produce finished goods. So the good news is that if you can’t supply finished goods that you can’t buy, you can’t raise prices, because there’s nothing to buy. Yes, well, except that it doesn’t work like that and there’s always some smart guy who gets away with it and finds a way to sell stuff, but at a higher price. This makes it possible to think in intellectual circles that inflation could rise as fast as a falling crypto-currency.

No need to draw you a picture, just the idea that inflation could apply the principles of Archimedes, which states that: “Any body immersed in a fluid at rest, entirely wetted by it or passing through its free surface, undergoes a vertical force, directed from bottom to top and opposed to the weight of the volume of fluid displaced. This force is called buoyancy. It applies to the center of mass of the displaced fluid, called the center of buoyancy. “- in short, to rise like a cork in the water, freaked everyone out and sent the market back to the same level it was at Monday morning when it was off in New York. We’ve got a market that’s almost as flat as Belgium and about as interesting as a 5th league soccer game.

“MEMES.”

So of course I could tell you about AMC and GameStop. AMC which sold $230 million worth of its titles at a price that would drive the inventors of the formula for valuing a company crazy and which, as soon as it has received the money, already wants to spend it on acquisitions… they should buy cryptos and announce that you can pay for your movie ticket in Dogecoin and I’ll slit my wrists with a butter knife. And then at GameStop, Roaring Kitty, the Youtuber turned Hedge Funds artisan-assassin is back to lather up the mother of all short-squeezes on GameStop. Words fail me to express how pathetic this is and how bad it will end.

As for the rest, we had the return of electric cars. NIO should explode according to an analyst, the whole sector follows, Lucid is on the verge of exploding and Rivian is heating up the market with its year-end IPO by saying they expect a 70 billion valuation – which would put them in the top 5 of the biggest car brands, without ever having sold one… This is also stuff that I love and that suggests that it will surely end well too… When there will be no more raw materials for batteries and when we will be forced to drive with diesels. Speaking of electric cars, the Wall Street Journal has also discovered email exchanges between Tesla’s lawyers and the SEC, and it seems that the SEC believes that Musk has violated the conditions that the authorities had set for him. It seems that he was reprimanded by the SEC, that he had to copy 20 times the words I won’t bother the SEC anymore and that he is deprived of recreation for 2 weeks – basically when you have money at this level, the law becomes a simple rhetorical question.

And in the meantime

In Asia the Nikkei is up 0.5% and the others are down 0.5%. Gold is back below $1900, posting its first real decline in a while. Oil is rising nicely and is close to $68 this morning. It must be said that the OPEC meeting has reassured everyone, oil producers do not intend to rush to reopen the taps and the outlook for demand and consumption is very good. Inflationary, but good. Meanwhile, cryptos are still in their downtrends, even if it doesn’t matter, as experts parade around the media saying that Bitcoin WILL be at $100,000 by Christmas. So any drop is just another opportunity.

I might as well tell you that I hope it will be the case at Christmas, otherwise I might just be making fun of it…

News of the day

For today’s news, apart from the fact that Credit Suisse is suing Softbank in the Greensill case and that for once it’s not them in the dock, apart from the fact that Zoom released some great numbers and that they were up 3% after closing last night, that Germany expects a growth of 3.4% in 2021 and 3. 7% in 2022 and that Novartis got an extension of use for one of its psoriasis drugs – which reminds us that there are also other diseases than COVID – nothing is happening and the only thing the markets are watching, is the signs of inflation and the long parade of central bankers who come to reassure us, to tell us to have confidence and that everything will be fine, that inflation is under control and that even if it goes badly, they are superbly paid and will continue to be so, so we shouldn’t worry about them.

Other than that, Lagarde will be the highlight of the day. Besides, the futures have understood this; they are doing absolutely nothing at all this morning. And in the distance you can hear music that goes “I got you, babe” – if you don’t understand why I say that, watch “Groundhog Day”. You’ll see, it will fill your day.

We’ll meet again tomorrow for a lesson in hypnosis with the continuation of the parade of central bankers. And remember: HAVE CONFIDENCE…..

Thomas Veillet

CIO Merion Swiss Partners