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thoughts on Europe & beyond +3

16:33 08-Sep-20

Virtu has announced that Asset Management One has deployed its Triton Valor execution management system.  AMOne is one the largest asset managers in Asia, but no numbers were provided.  So, my main commentary is that this fits well with today's theme of diversifying beyond U.S. markets. 

It also serves as a good excuse to note that MEMX plans to go live with six tickers on September 21st, and with all of them on September 29th.  VIRT has traded toward $30 of late, as I expected, and starting to see some of the knock on effects from MEMX is the first even which I hope will allow me to raise that price target.  It should be followed by more specificity on debt pay down and then an update on the capital return policy.  In the meantime, hydrocarbons and consumer credit are showing that Virtu's other side will have more volatility to feed on. 

The former is bad enough that Schlumberger is continuing to look like it wants to be a pure play technology company, even in this market.  Hopefully it went without saying that I still have no interest in either SLB or RDS(A/B) despite the modestly good news for each.

Equity futures are down this morning, and Nokia shares are down a little with them now that Samsung's deal with Verizon has made the whole world is sure that the latter is phasing Nokia out.  It's nothing compared to the carnage in oil, with Brent/WTI at $37.43/40.46, but natural gas is still at $2.56.  Shell's deal with Hungary reinforces my view on the latter.  Much of the former is due the dollar strengthening all the way back below 1.18 euros as Brexit starts to get down to the nitty gritty.  I've repeatedly referenced the U.K. is a microcosm and forerunner of the U.S. in many ways, and we can see that in the poor handling of the pandemic, and how that affects the economy and negotiations of each country. 

I suspect the world is mostly figuring that it only has to put up with Trump for another two months.  I am unwilling to gamble on that, given the unreal state of the American election process.  Census workers had a big but temporary impact on last week's jobs report, but they are too late to affect the upcoming election, which is wide open to many other forms of tampering.  Right or not, this explains, German dithering over Nord Stream 2.  For the Chinese, the question is how seriously to take election motivated threats.  Specifically, delisting Chinese stocks from American exchanges would be a substantial blow in the short term, but it would do more than anything else to accelerate the shift away from American markets that I've looked for over the coming decade.

The E.U. also has its problems of its own creation over that time frame, but I still think it will hold together.  Again, whether that's right or not, I think major companies like Vodafone can benefit and I see the current lows as an extreme value.  However, for those who tire to the market's neglect of value, the biggest beneficiary of the Verizon/Samsung deal could be Resonant.  The two companies have history, and the macroeconomics discussed mean that everyone is going to price sensitive.  RESN shares are up 3% so far in the pre-market, but that's nothing compared to recent declines.  I am willing to take a small chance on them up to the $2.53 price paid by Murata, despite my misgivings about management, and another likely capital raise, signaled by this morning's announcement.  Nokia's loss is also Google and CenturyLink's gain, as major customers turn elsewhere for edge, backhaul and cloud services.  GOOG is still nowhere near buy territory for me, and my $4 target on NOK remains unchanged, having already considered all this.   CTL still looks attractive though.  Enjoy the ride.

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