thoughts on China, Georgia & Washington ?3

08:17 06-Jan-21

It looks like Democrats are going to gain the Senate, with VP Harris breaking ties.  Warnoff's win has been called, with a 1.2% margin of victory, but the Ossoff/Perdue race might be going to a recount, with the Democrat leading by less than 0.4%.  Ossoff would need to gain another tenth of a percent with less than 2% of votes uncounted to avoid that possibility.  The Senate theater over the presidency will start at 1pm, and the IRS has also begun sending second relief checks.  Stock futures are down modestly and €/$ spiked to 1.235 but has since pulled back by almost tenth of a percent.

Xebec has also received approval to uplist on TSX as of tomorrow.  I see this as a stepping stone to enable options trading, which is positive.  However, I am not inclined to chase XBC/XEBEF at current prices.

In the real world, Europe has finally approved Moderna's vaccine, but vaccination remains slow.  The Saudis also pledged a surprise unilateral oil cut of 1Mbpd, but gains are already fading, as I think there is reason to doubt that Russia will stick to its prescribed output levels. 

On 1/5/21 11:34 AM, Esekla wrote:

The most important market news today is probably that nothing happened in Europe, and much less in London, yesterday.  The latter pan-asset- class decline in volume has already been underway for quite some time and my read is that it is not quite over yet.  I've already called out Virtu and to a lesser extent, BGC as beneficiaries.  European readers might take an interest in FLOW (Traders) on EuroNext, but the American volume in FLTDF is untenable. 

Also untenable is my interest in LuFax.  LU did decline, but not enough to make it a real value, and the disappearance of Jack Ma highlights my concerns about the country.  America may need complete revamps of its electoral process, education, health care, etc. but no matter how slim the hope of any real change, it is still an order of magnitude greater in America than in China.  Furthermore, the NYSE reversal on Chinese telecoms argues that despite some theatrics, the transition of power in Washington will run its course tomorrow.  That said, I still view the damage to American credibility as more or less permanent.

Thus, even abroad, most eyes are on Georgia today.  We almost certainly won't know the results of the Senate runoffs until after the market closes.  From an international perspective, this is most important to currencies; if Democrats control the Senate, expect dollar decline to accelerate, which would push dollar-denominated stocks up, but only for the short term.  Otherwise expect a dicier market.  Either way, I will be avoiding big media and index majors like Google, as well as oil, and waiting months, if necessary, for the large market pullback that I'm viewing as almost inevitable. 

With GLNG now above $10, income plays like GMLPP and VOD look a little more attractive.  For real capital growth, LUMN, BGCP, VIRT and some long shots like OEG and RESN are the only viable options that I see left.  The recent decline in BGCP makes it a little more attractive than VIRT but details on a corporate transformation remain a question mark, which might be perversely straightened into an exclamation point by a split Congress.  That said, it will still take some time for both companies to optimize their businesses and show results from tectonic market shifts and buybacks; waiting might still prove a better decision for the medium to long term.