wknd notes: Don't Overthink Things

Dusted off a Thanksgiving anecdote from 2015 about not overthinking things (see below). See you next Sunday with full weekend notes. E

Week-in-Review (expressed in YoY terms): Mon: Hong Kong pro-democracy candidates win 90% of seats in local elections (record 71% of eligible voters went to polls), Japan to consider increasing 40yr bond issuance, UN describes future as “bleak” as atmospheric greenhouse gases hit record (emissions need to drop 7.6%/yr for a decade to stabilize temperatures at 1.5 degrees Celsius above pre-industrial levels, Britain’s chief rabbi condemns Labor Party for failing to root out antisemitism, Britain’s ruling Conservatives publish a manifesto ahead of Dec 12th elections (promises to “Get Brexit Done” and hire more police and nurses), Uber loses London license, Spanish PPI +0.5 to -2.8%, Michael Bloomberg declares presidential candidacy, America’s secretary of the Navy resigns over disagreement with Trump, S&P +0.8%; Tue: HK police storm university and remove remaining protestors, Singapore industrial production +3.7 to +4.0%, Democrats invite Trump to attend impeachment hearings, Trump to designate Mexican drug cartels “terrorist organizations,” S&P -0.2%; Wed: China industrial profits -9.9% (largest on record and down 4 of 5mths), Corbyn refuses to apologize for antisemitism during television interview, US Q3 GDP revised +0.2 to +2.1%, durable goods orders rebound, Trump signs 2 laws supporting HK democracy activists, S&P +0.4%; Thur: China denounces US support for pro-democracy activists in HK, Japan unemployment unch at 2.4% (26 year low), UK polls show Boris Johnson’s Tories likely to win strongest election victory since Thatcher, EU Parliament declares “Climate Emergency” in 429 versus 225 vote, Trump visits troops in Afghanistan (restarts peace talks with Taliban), New Canaan beats Darien Football 20-0 in terrible Turkey Bowl upset, S&P closed (Thanksgiving); Fri: South Korea rates unch at 1.25%, India Q3 GDP -0.5 to +4.5% (6yr low), Gazprom profits fall 45%, Euro currency posts least volatile week versus US dollar since 1999 launch (0.38% weekly range), EU CPI +0.2 to +1.0%, Daimler cuts 10k jobs, US posts first mthly net oil trade surplus since 1940s, S&P -0.4%; Sat/Sun: China PMI manu 50.2 (first reading above 50 since April), China PMI services 54.4 (8mth high), Iraq’s Prime Minister resigns following chronic protests/bloodshed, London terror attack kills 2 (ISIS claims responsibility). 

Weekly Close: S&P 500 +1.0% and VIX +0.28 at +12.62. Nikkei +0.8%, Shanghai -0.4%, Euro Stoxx +0.9%, Bovespa -0.7%, MSCI World +1.2%, and MSCI Emerging +0.2%. USD rose +1.3% vs Chile, +1.0% vs Brazil, +0.9% vs Mexico, +0.7% vs Yen, +0.7% vs Russia, +0.6% vs Turkey, +0.3% vs Australia, +0.1% vs Indonesia, flat vs India, and flat vs Euro. USD fell -5.2% vs Bitcoin, -1.0% vs Ethereum, -0.8% vs Sterling, -0.6% vs Sweden, -0.4% vs South Africa, -0.2% vs Canada, and -0.1% vs China. Gold +0.1%, Silver -0.1%, Oil -4.3%, Copper +0.2%, Iron Ore -1.6%, Corn +0.7%. 5y5y inflation swaps (EU flat at 1.21%, US -5bps at 1.99%, JP -1bp at 0.11%, and UK -3bps at 3.54%). 2yr Notes -2bps at 1.61% and 10yr Notes +1bp at 1.78%.

Nov Mthly Close: S&P 500 +3.4% and VIX -0.60 at +12.62. Nikkei +1.6%, Shanghai -1.9%, Euro Stoxx +2.7%, Bovespa +0.6%, MSCI World +3.1%, and MSCI Emerging +0.8%. USD rose +18.6% vs Bitcoin, +17.4% vs Ethereum, +9.2% vs Chile, +5.4% vs Brazil, +1.9% vs Australia, +1.7% vs Mexico, +1.3% vs Yen, +1.2% vs Euro, +1.1% vs India, +0.9% vs Canada, +0.6% vs Turkey, +0.5% vs Indonesia, +0.3% vs Russia, and +0.1% vs Sterling. USD fell -3.0% vs South Africa, -0.8% vs Sweden, and -0.1% vs China. Gold -3.4%, Silver -6.3%, Oil +2.3%, Copper +0.5%, Iron Ore -3.7%, Corn -4.4%. 5y5y inflation swaps (EU flat at 1.21%, US +1bp at 1.99%, JP -1bp at 0.11%, and UK +5bps at 3.54%). 2yr Notes +9bps at 1.61% and 10yr Notes +9bps at 1.78%.

YTD Equity Index Returns: Greece +41.4% priced in US dollars (+47% priced in euros), Russia +34% priced in dollars (+23.9% in rubles), Israel +31.4% (+21.9%), NASDAQ +30.6%, S&P 500 +25.3%, New Zealand +22.9% (+28.4%), Ireland +22.8% (+27.7%), Switzerland +22.6% (+24.5%), Canada +22.4% (+19.3%), Italy +22.2% (+26.9%), Germany +20.7% (+25.4%), Russell +20.5%, France +20.1% (+24.8%), Denmark +19.6% (+24.3%), Euro Stoxx 50 +18.7% (+23.4%), Taiwan +18.2% (+18.1%), Netherlands +17.8% (+22.4%), Japan +17.5% (+16.4%), Australia +16.4% (+21.2%), Belgium +15.9% (+20.4%), Sweden +15% (+22.8%), Portugal +13.9% (+18.4%), Colombia +13.2% (+19.3%), China +12.6% (+15.2%), Brazil +12.4% (+22.8%), UK +10.8% (+9.2%), Austria +10.1% (+14.4%), Thailand +9.5% (+1.7%), Turkey +7.8% (+17.1%), India +7.8% (+11%), Philippines +7.1% (+3.7%), Czech Republic +6.2% (+9.5%), Norway +5.4% (+11.4%), Spain +5.3% (+9.5%), Finland +4.9% (+9%), Singapore +3.7% (+4.1%), Mexico +3.4% (+2.8%), Hungary +3.2% (+11.7%), South Africa +3.1% (+5.1%), UAE +2.3% (+2.4%), HK +2% (+1.9%), Saudi Arabia +0.5% (+0.4%), Indonesia -0.2% (-2.9%), Korea -3.4% (+2.3%), Poland -4.2% (-0.3%), Malaysia -8.6% (-7.6%), Chile -23.2% (-11.1%), Argentina -28.7% (+13.3%).

Anecdote (Dec 2015): “Cliff jumping,” answered Jackson, without hesitation, taking charge. Olivia, Teddy and Charlie cheered. Filling the air with the magic of mischief. I’d asked for ideas. We needed out. Thanksgiving had overwhelmed us. So we piled into the Suburban, in search of sanctuary, solitude. The Greenwich cliffs are hidden deep in back-country. And like so much in today’s wild, they’re forbidden. So we whispered our way through the woods, Wolfie and Shackleton sniffing for squirrels. Blazing our own twisted trail, freshly fallen leaves in our wake. Now, truth be told, cliff jumping in November was not the first thing that sprang to my mind. But having learned a thing or two about parenting, I know that in certain situations there’s no better time to say yes than when they think you’ll say no. So without overthinking it, I’d instinctively agreed. Electrifying us all. We first went cliff-jumping in October, on my 49th birthday. The sun bright, leaves brilliant red, yellow. Our screams rippling across the lake. The water unknown, cold. So with some mornings now blanketed in frost, we worked ourselves into a frenzy imagining the polar plunge. The cliff-top neared, the wind picked up, driving rain through the forest, drenching the dogs – we squealed with nervous excitement. Children allow us to relive life, if only we let them. And when we do, they help us see things all over again, afresh, the world anew; their gift. “My nuts are gonna turn to ice cubes!” shrieked Teddy, laughing, kind of. I stripped down. “Whatever you do, don’t overthink it,” I hollered, my greatest advice, the story of my life. They followed in rapid succession, my little lemmings. Screams echoed. The frigid water paralyzed our lungs. Fired our hearts. Breathed life. And what was once a quiet November lake, was somehow something new.

Good luck out there,

Eric Peters

Chief Investment Officer

One River Asset Management

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.