If this week’s volatility has unnerved you, take a deep breathe, sit back and consider the following assessments courtesy of global macro strategy think tank Rareview Macro and extracts of this a.m. edition of “Sight Beyond Sight.”
Today’s edition is not meant to be read as us preaching a gospel. Instead it is a collection of the thoughts we have gathered through a number of recent meetings/conversations with investors who take plenty of risk, and it has served us well in the past to just write down what people we respect are saying. Therefore, if at times the opinions below come across as too skewed one way or adopt the tone of a “bomb thrower” just take them with a grain of salt.
In the end, our biggest issue is that it is just a matter of a few hours to a couple of days before all investors catch up and put together a similar puzzle.
That is why you should read this entire edition even if it is lengthy and the only morning note you read. Continue reading →
Below extract courtesy of today’s a.m. edition of macro-strategy commentary from Rareview Macro’s “Sight Beyond Sight”
1. Taiwan equities were cut to equal-weight from over-weight at Morgan Stanley (Jonathan Garner) on valuation concerns.
2. Morgan Stanley recently cut Asia’s semiconductor industry to equal-weight from over-weight.
3. Maybank, a local house, cut Taiwan Semiconductor (symbol: 2330 TT) to sell from hold. This is currently the only sell rating on TSMC.
If it were not for Russian equities falling on account of the new round of sanctions the Taiwan Taiex (symbol: TWSE) would be showing the largest negative risk-adjusted return in equities for the second day running. Taiwan Semiconductor closed down -4.6% last night. Taiwan Semiconductor holds a ~12% weight in the Taiex. This is a dramatic fall as it is not considered a high beta stock.
Compounding the matter further the Asian weakness followed on from Sandisk dropping by 10% after-hours due to a poor earnings release. We are not going to pretend that we know anything much about Sandisk, except that that it makes memory cards, but what we do know is that the professional community leaned very long into this earnings event. Furthermore, this follows the short-covering in Intel (symbol: INTC) that these same investors who are very overweight semiconductors used as a funding leg (i.e. short position) to pay for them. We still cannot believe Intel is/was the most heavily shorted name in the Dow Jones Index given its 35% run higher. That is a lot of PnL pain to endure, to the point where you have to truly believe your longs are going up even higher to make up for it.