23rd of July 2021

Third consecutive session of increase on the world indices. All is well. We have found a new reason to hang on and believe. From now on, we will focus on the quarterly figures and forget about the rest. At the same time, as long as Powell is not speaking, we cannot know what to do with the transitory inflation. It’s like being somewhere where there’s no network, no 4G, no Edge, nothing. You have to think of something else if you don’t want to panic. So here we are, ultra-focused on the numbers for the quarter. The ones we know will be too good compared to expectations. The ones that are based on our interpretation of them.

Fortunately, there is growth

Yesterday there was ABB, which did better than expected. There was also SNAP, which did very well and exploded its revenues. Even the analysts didn’t see it coming. There was also Twitter which showed a too cool quarter that (ONCE AGAIN) surprised the extremely sharp financial and economic analysis community. And then there was also the semiconductors with Intel starting to get hot under the collar because of AMD, Texas Instruments which “disappointed” in its releases because revenues are slowing down. And when you put “slowing” and “revenue” in the press release, it never looks good in the wonderful world of quarterly forecasts. Not to mention that the whole sector was under pressure because even though no one really understands why, the semiconductor shortage is not a huge economic advantage for the companies in the sector.

So yesterday the SOX was down, there are even articles that started to say that Nvidia will suffer from the fact that the Chinese are kicking the “Bitcoin miners” because they will sell less microprocessors. In summary, yesterday’s session was NOT a good one for the industry and the phrase “yes, but that’s because of the shortage” has become the most frequently used excuse in the industry. You can try it, no one will dare ask you the why and how, I assure you. I’ve tried it and every time someone explains to me why shortage and why it’s not good for the companies that make it, I don’t understand anything, I pick up after the third sentence and then go on Facebook to read the experts’ opinions on vaccines. So it was a bad day for semiconductors.

But fortunately, there is not only SOX in life, as the speakers quickly refocused on the stocks that always win in the end, I named: GAFAM’s. You should know that there is an advantage to buying GAFAM’s, it is that nobody will blame you. Who could say anything bad about Apple really? Who could think that Google won’t perform the next 12 months? And when you get tired of trying to buck the trend on Facebook, you always end up going “long” and finding that Mark Zuckerberg looks REALLY nice.  And then Microsoft is a sure thing that’s only going up and Amazon, its founder is going into space, so you can’t say anything bad. Because people going into space are so cool. In summary of yesterday’s session; the speakers were RE-focused on the numbers for the quarter and decided that in the absence of a vision for the future, they might as well focus on the past.

The little techniques that make the pill go down

While we thought the quarterly numbers were GENIUS and played the game of anticipating how the financial stars would interpret the slowdown in revenue growth at Texas Instruments, the Jobless Claims numbers were released during the afternoon.

So the important thing to remember is that the Jobless Claims are THE weekly numbers that have been driving the market up for the past 5 months. Week after week, it was so nice to see that jobless claims were falling and that for 11 weeks in a row people went less and less to ask the state for money that it became a kind of drug. Our Thursday shot was a habit, something that reassured us that everything was fine and that the five-year plan put in place by the higher governmental authorities was working perfectly. Well, for the past two or three weeks, the numbers are not as good as they used to be and they tend to go up again. Just like yesterday. We didn’t expect 50,000 more people to claim unemployment. So we came up with something:

“Let’s stop focusing on that and focus on the quarterly numbers that are better than expected!!! By the way, did you see SNAP like it was too good???”

It must be said that the technique of NOT LISTENING TO BAD NEWS works quite well. You put your hands over your ears and press very hard for the duration of the bad news, you can even yell: LALALALALALALALALALALALALA !!!! very loudly at the same time. The noise helps you not to hear the rest. Then you just pretend nothing happened, and refocus on the quarterly numbers that were too good – by the way, did you see the Twitter numbers? – and that’s it. You’ve got a third straight session of gains in the stock market and the best part is that Powell wasn’t even there to help.

Christine Lagarde and the broken record strategy

SNAP and Twitter numbers aside, it’s also worth noting that Madame Lagarde spoke yesterday. And I don’t know if it will change the face of the investment world in Europe, but I think it’s worth talking about. We have to talk about it because “globally” I have the impression that the ECB’s boss is like a scratched LP: she repeats herself so often that we are close to exchanging the turntable for an MP3 player.

The ECB’s current line is: “The European Central Bank is committed to keeping interest rates low for an extended period of time and to supporting the euro area economy until inflation stabilizes at 2% on a sustainable basis”.

She said it last week, she said it on Wednesday, and for those idiots who hadn’t yet figured out that the European Central Bank is committed to keeping rates low for an extended period of time and supporting the Eurozone economy until inflation stabilizes at 2% on a sustainable basis, she repeated it AGAIN yesterday. At times, it seems as if she is doing what Powell did with his transitory inflation; she thinks that by repeating, repeating and repeating again, we will eventually find it positive, cool and intelligent. And this, while being perfectly aware that seeing the European economy reach 2% inflation is about as credible as putting a trout at the foot of a tree and telling it: I’ll put you back in the water when you reach the top. But it must be said that it works, because investment experts feel “relieved” to know that the former IMF boss will do “whatever it takes” to support the economy, to make sure that the CAC40 will catch up with the DAX and that Bernard Arnault will be rich enough to build a rocket to go into space.

In short, yesterday we went up and overall, EVERYTHING IS GOING WELL, just don’t rummage around in the cupboards too much and tell yourself that Lagarde knows what she’s doing and that inflation is transitory. Not to mention: Hey, have you seen SNAP’s results?

Asia cautiously optimistic 

This morning Asia is in “cautiously optimistic” mode, thanks to the good US quarterly figures and the “LALALALALALA, I’m plugging my ears” technique about Jobless Claims. And then it must be said that Japan is closed so that the Japanese have time to lock themselves up at home to watch the opening ceremony of the Olympics without an audience that interests no one except the athletes who go there. As for the rest, it’s down by 1% in Hong Kong and 0.6% in Shanghai where they don’t care about the American quarterly figures and especially those of SNAP, because they don’t use SNAP in China, the government not being a big fan of data that disappear after 30 seconds, which would prevent them from tracking down opponents of the regime as they should. We can understand them.

As for the rest, since the quarterly figures are good, there is a new taste for growth and we think that one day, people will go back to the gas station to fill up their tanks, to take a plane or a boat and to buy a lawnmower with gasoline. So oil is going up again and is close to $72 – suddenly we don’t give a damn about the production increases decided by OPEC, 400,000 barrels a day is barely enough for a Blue Origin space flight. By the way, could someone tell Bezos that he looks completely ridiculous with his cowboy hat and flight suit? Otherwise gold is at $1804 and I will refrain from commenting on it until Monday. As for cryptos, it’s the caterpillar that’s starting up again and it looks like it’s going to go up again. Apparently, mixing Bitcoin, Ether and positive comments from Elon Musk should eradicate cancer and COVID within 6 months.

Fresh News

As far as the news of the day is concerned, it remains rather meager and the stifling summer heat reduces the amount of interesting information to the speed of melting an ice cube in a glass of Spritz. Nevertheless, we’ll note the following:

– The FT mentions the fact that the ECB is suffering from internal dissension and that not everyone agrees with Madame Lagarde’s position. OH WELL? Because there are other people at the ECB?

– The Lucid Motors SPAC merger could not be approved yesterday because not enough shareholders voted. It must be said that the letter to the shareholders was so complicated that it looked like the leaflet of an antidepressant. It is understandable that, in doubt, some abstained.

– We note that Unilever complains about the rise in raw materials and warns that its costs are rising rapidly. So Powell will have to be very persuasive the next time he talks about transitory inflation.

– The Twitter and Snap numbers were great, but I think I’ve said that before. The FT’s political columnist thinks the Biden-said-the-Messiah presidency is entering the critical phase and that he’s going off the rails nicely. Well, he will have lasted 6 months. That’s already better than I expected. Otherwise, in the important news of this Friday morning, it should be noted that the job application and the cover letter that Steve Jobs wrote in 1973 will be put on sale via NFT. That Jeff Bezos still looks ridiculous with his stetson, that the CDC boss announces that the Delta variant is the most infectious respiratory disease we know and that we’re all going to die. But otherwise, you really have to look at SNAP’s numbers.

As for the quarterly numbers, we will have American Express and Schlumberger and next week it will be champagne and cotillion with the numbers of the big Bertha’s and for the economic numbers of the day, it can be summed up in 3 letters: PMI.

It remains for me to wish you an excellent day and a very good weekend. See you on Monday for an update! Have a good rest!

Thomas Veillet

CIO Merion Swiss Partners