wknd notes: Taking Shots

“My heart goes out to every child who had to walk back into their classrooms today,” said the radio host as I drove my kids to school. “That’s what I’m talking about! I love this station!” cheered Teddy, laughing. “Shut up Teddy, she’s talking about the 17 kids who were shot dead at a school,” said Jackson, shaken, uncharacteristically. The car went quiet. “Who shot them?” asked Teddy. “Another kid,” said Jackson and Olivia in chorus, angry. “Why would anyone kill kids?” whispered Teddy, almost to himself. And I rolled on, as did America, furious, speechless, ashamed of our inaction, but doing absolutely nothing.  

Headed north to Mount Washington, for President’s Day. And dusted off an anecdote about taking shots (see below). Back next Sunday with full weekend notes. 

Week-in-Review (expressed in YoY terms): Mon: Italy’s 5-Star calls for EU to push for public debt restructuring, Trump pushes states to help fund $1.5trln infrastructure spend, S&P +1.4%; Tue: Former top Chinese official seen as possible successor to Xi is jailed for corruption, Yen strengthens through 108 versus dollar, ANC orders Zuma’s resignation, UK CPI unch at +3.0%, IEA “US is forecast to surpass Russia to become world’s biggest oil producer in 2019,” Fed’s Powell “We are in the process of gradually normalizing both interest rate policy and our balance sheet. We will remain alert to any developing risks to financial stability,” S&P +0.3%; Wed: Japan Q4 GDP slows 2.0 to +0.5%, South Africa police raid Gupta compound for corruption investigation, Zuma “ANC moves to oust me are unfair,” Egypt issues $4bln in USD debt (5yr 5.6%, 10yr 6.6%, 30yr 7.9%), Boris Johnson “derailing Brexit would be disastrous,” Sweden rates unch at -0.50% (one dissenting vote for hike to -0.25%), Italy Q4 GDP +1.6%, German 2017 GDP +0.3 to +2.2%, Goldman’s Blankfein “Central banks around the world have been buying everything in sight, which is a blanket on volatility,” US CPI +2.1% (exp +1.9%), core CPI +1.8% (exp +1.7%), retail sales +3.6% (but mthly sales -0.3%, worst since Feb 2017), Trump to meet Mexican President in coming weeks, S&P +1.3%; Thur: Chinese Year of the Rooster ends (let the Year of the Dog begin – Woof!), Aussie unemployment -0.1 to 5.5%, EU 2017 trade surplus expands, Fitch upgrades Greece, Senate rejects bi-partisan immigration plan, Soybeans hit 7mth high on drought concerns, S&P +1.2%; Fri: Chinese avg annual bonuses for white collar workers fall 43%, Kuroda renominated for another 5yr term at BOJ, RBA sees little need for rate rise, Turkey/US agree to lock arms in Northern Syria, German wholesale prices +0.2 to +2.0%, UK retail sales weak, US indicts 13 Russians for meddling in US elections, US commerce dept recommends steel tariffs/quotas (steel stocks surge), consumer sentiment hits 2nd highest since 2004, Mitt Romney runs announces Senate run, housing starts jump most since Dec 2016, Deere lifts outlook, S&P unch; Sat/Sun: Bitcoin hits $11,000, McMaster “Russian meddling in US election is beyond dispute.”    

Weekly Close: S&P 500 +4.3% and VIX -9.60 at +19.46. Nikkei +1.6%, Shanghai +2.2%, Euro Stoxx +3.3%, Bovespa +4.5%, MSCI World +3.9%, and MSCI Emerging +5.2%. USD rose +0.6% vs China. USD fell -15.3% vs Bitcoin, -7.8% vs Ethereum, -3.3% vs Russia, -3.0% vs South Africa, -2.3% vs Yen, -2.1% vs Brazil, -1.9% vs Turkey, -1.7% vs Chile, -1.4% vs Sweden, -1.4% vs Sterling, -1.3% vs Euro, -1.3% vs Australia, -0.9% vs Mexico, -0.8% vs Indonesia, and -0.3% vs India, and -0.2% vs Canada. Gold +2.5%, Silver +2.0%, Oil +4.4%, Copper +6.1%, Iron Ore +0.0%, Corn +1.4%. 5y5y inflation swaps (EU flat at 1.75%, US -7bps at 2.39%, JP +4bps at 0.44%, and UK +3bps at 3.50%). 2yr Notes +12bps at 2.19% and 10yr Notes +2bps at 2.87%.

2018 YTD Equity Indexes: Russia +9.2% priced in US dollars (+6.9% in rubles), Greece +9.1% in dollars (+5.4% in euros), Finland +8.5% (+4.9%), Italy +8% (+4.3%), Colombia +7.6% (+2.2%), Czech Republic +7.5% (+3.2%), Thailand +7.1% (+3%), Malaysia +6.7% (+2.3%), South Africa +6.1% (-0.8%), Mexico +5.5% (-1%), Norway +5.4% (-0.1%), Portugal +4.9% (+1.4%), NASDAQ +4.9% (+4.9%), Chile +4.8% (+1%), Indonesia +4.2% (+3.7%), UAE +4.1% (+4.1%), Saudi Arabia +3.9% (+3.9%), HK +3.9% (+4%), Singapore +3.1% (+1.2%), Austria +3.1% (-0.4%), France +2.9% (-0.6%), Belgium +2.5% (-0.9%), Hungary +2.5% (-0.6%), Argentina +2.4% (+8.7%), Poland +2.3% (-1.5%), Turkey +2.2% (+1%), S&P 500 +2.2% (+2.2%), Sweden +1.6% (-1.3%), Denmark +1.6% (-1.8%), Spain +1.3% (-2.1%), Japan +1.3% (-4.6%), Euro Stoxx 50 +1.2% (-2.2%), Netherlands +1.1% (-2.3%), New Zealand +0.9% (-3.2%), Switzerland +0.7% (-4.2%), Russell +0.5% (+0.5%), Ireland +0.5% (-2.9%), Germany -0.2% (-3.6%), China -0.8% (-3.3%), Taiwan -0.9% (-2.1%), Australia -1.3% (-2.7%), UK -1.5% (-5.1%), India -1.6% (-0.7%), Korea -2.1% (-1.9%), Israel -2.5% (-0.7%), Philippines -3.8% (+0.6%), Oh Canada -4.8% (-4.7%). 

Anecdote (July 2015): “What were you guys talking about?” asked Jackson as we left the office. My 13yr old had swung by after practice, waiting for a ride home. Instead of answering directly, I asked him what he thought our investment team had been discussing. “You were all trying to figure something out, and it seemed like you kind of did, but it also seemed like you kind of didn’t.” He wasn’t wrong. And sensing an opportunity to explain what I do for a living, I told my son I went to Chicago after college to play this game because it seemed like something that would never grow boring. And in 26yrs – double his lifetime – it never has. Never will. The price of certainty is boredom, so I chose differently. But just because something’s fundamentally uncertain doesn’t mean you don’t try and make sense of it; digging deep, searching for patterns, market rhythms, rhymes, openings, opportunities, possible outcomes that are more likely than others. And all the time, you need to weigh the risks and rewards, some of which are themselves uncertain. Jackson’s a literal kid, his world painted in black and white, and needed an example. So I asked why he likes lacrosse? “I don’t know, I just do.” What do you think about when you have a shot? “Where to put it.” What if both the upper right and left corners look good, which do you take? “Whatever’s best.” How do you know what’s best? “I just do.” So do you always score? “Obviously not.” Why? “Because sometimes I mess up, or sometimes the goalie’s just really good.” Do you remember every shot, your goals, your misses? “Yup.” Do you think about them, analyze them? “All the time.” Why? And Jackson just smiled.

Good luck out there,

Eric Peters

Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, drink with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.