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Commodities
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Wissam Ali
High Performance Computing Systems Engineer

Understanding which equity sector to invest in

I am posting here two charts from Bridgewater that explain how someone can allocate to equity sectors based on what you think the macro outlook is:

The chart above says the following:

  1. If you believe that we will not have rising rates of economic growth with no rising rates of inflation and ample liquidity, you should invest in Hi-Tech especially software. This is Raoul Pal's thesis.
  2. If you believe that we will have a rising rates of economic growth environment with inflation with no ample liquidity you should be investing in value stocks and the resource sector.

The charts above compares the performance of Tech in 2020 versus value and resource sector in 2021. In 2020 we had the first condition (point number 1) and in 2021 we had the second condition (point number 2).

As investors we need to determine which macro environment we will be in for the next few years. Is it point number 1 or point number 2? This gets tricky for two reasons: A) Government fiscal policy and B) The FED will never stop QE. Julian Brigden's thesis is centered on point number 2 due to fiscal policy and he also believes we will get yield curve control which is another way of saying shit loads of liquidity. In this environment you load your truck with commodities, gold and gold miners.

How this impacts Bitcoin I do not know. I am still trying to assess how the market is assessing bitcoin? If it is an... (More)

Friday's Daily Briefing extendo-jam (please?)

I've watched Friday's DB twice now and speaking as a relative noob, it feels like so much of the conceptual knowledge I've taken in since joining RV is playing out in real time. (i mean, it's always playing out, but there's this convergence across major macro components--dollar, bonds&yields, inflation, commodities, knock-on effects, sector interplay--that feels a bit different in my experience). Any chance @Jack Farley @Nick Correa could do a quick follow-up explainer video and unpack some of this one?

How did your "Defenders" do in the last few down days?

Applying what I learned from this RV interview:  Parrilla and Pal -- A Macro Masterclass in Portfolio Construction and Management | Real Vision

My "Strikers" have gone MIA the last 3 days but thanks to the "Defenders", I'm basically flat.  Note, I have several different types of defenders.  Not all brought their "A" game, but TLT did.

Did you utilize defenders, if so what were they?

Happy Friday!

 

PS:  perhaps dodged a bullet for now, but still too early to claim victory of any kind and nor was trying to.  Meanwhile learning and absorbing as much as time permits.

John Crockett
Independent Global Macro Investor

Inflation Vs. Deflation (Goods vs. Services): Quick Thoughts & Analysis of Peter Boockvar's Views

Just watched another good Peter Boockvar video on the inflation debate. Was basically a re-hash of his RVDB interview the other week with Ed Harrison, with some interesting caveats and additional thoughts. Link here:

We currently have a ton going on in the inflation versus deflation debate, and yesterday's meltdown in the value/commodity & PM (and tech strength) space could either be a watershed moment for the next few months/weeks -- or it just could have been a small bump in the road for the commodity supercycle. Or something in between (more likely)?

I follow a lot of people on RV, Twitter and just on YouTube. On the inflationista side of the equation (i.e. inflation is NOT transitory, at least for the next 2-3 quarters) we've got guys like Peter Boockvar, Jared Dillian, Tony Greer, Keith McCullough, Jeff Gundlach & Julian Brigden (among others). Raoul and guys like Scott Minerd from Guggenheim are currently still in the 'it's transitory, yields going back down' camp. They have been right the last few weeks, but whatever side you're on, all of them make pretty good cases either "for" or "against" continuing inflation.

For me at least, Boockvar's overview really spells out the battle clearly and concisely and I think he's right that we're ultimately going to see more service industry inflation for in the coming months for sure.

Reasons being:

  1. Rent portion of services inflation poised to really break out in the coming months (PCE undercounts it though)
  2. healthcare component also going... (More)