Friday 📸: Portfolio Review, New Trades

Commodities are rolling over hard these last few weeks - it’s hit the portfolio. We continue to rotate into strength and out of weakness as needed. Both diversified commodity indices: the Thomson Reuters/Jeffries Core Commodity Index (CRB) and the Bloomberg Commodity index have given up much of their gains ytd.

The dollar looks to be breaking higher.

But zoom out to a monthly timeframe and look again. We’re not yet changing out of reflationary territory yet - so also we’re not in a Dollar bull market for now.

Here’s the breakdown of the Reuters CRB Index sector weighting:: Energy: 39%, Agriculture: 41%, Precious Metals: 7%, Base/Industrial Metals: 13%.1

And Bloomberg’s commodity index weighting looks like this2: Energy: 29%, Grains: 21%, Industrial Metals: 16%, Precious Metals: 19%, Softs: 9%, Livestock: 6%

Now for the price charts: here’s the Reuters CRB - it’s still in a long-term uptrend, as much as it doesn’t feel that way right now:

Bloomberg looks choppier - like it’s consolidating:

And on this same, monthly timeframe - the dollar’s recent rally doesn’t look quite so convincing:

I think folks have gotten overly bulled up on the dollar and on short term interest rates, due to an overreaction to the new Fed Chair Kevin ‘Kevbo’ Warsh doing anything other than cooing like a monetary dove.

Commodities and Kevbos aside for a moment - there are a couple especially notable and not as often talked about areas of strength that provide clues to the global economic outlook.

First - the overlooked index of China’s stocks - the CSI 300, via the US listed ETF ASHR 0.00%↑ . Tech-headed US traders tend to focus on Chinese tech only — which looks bad, but this broader index of China’s stocks is as strong a chart as you’ll see:

A broad array of 300 Chinese companies (the engines of supply) swimming in cash does not seem bearish for the global economy. We had $|ASHR in the long-term accounts already, but have now added a position in the swing account as well.

But if ‘Murrica is more your vibe, take a look at the US regional bank ETF KRE 0.00%↑

That’s a fresh breakout this week - we bought.

If short term interest rates were really headed higher, would regional banks whose lifeblood is balancing the interest rates of their liabilities vs their assets be breaking out? Nope. If we were headed into a recession - would these regional banks… responsible for real estate financing and small business cash flow push toward all time highs?

Through all this chop - we follow our system and stay true to it, and to price.

P.S. I’m sure that the US + Israel will forever get along peacefully with Iran from now on. Nothing could go wrong now that everyone knows the straight of Hormuz, among other global shipping chokepoints, can be weaponized.

 PPS: I’m also entirely sure we will need these trillions of dollars in ‘compute’ (computational capacity) via data centers and related energy infrastructure because corporations worldwide will only accelerate adoption of expensive, bespoke AI models from the US, rather than cheaper, open source, more energy efficient Chinese models.

PPSS: I can guarantee that AI regulation will be exactly like other regulation. Even though we are seeing governments step in to control releases due to the pace of AI model sophistication outrunning cybersecurity — there is nothing to worry about. AI is not dangerous, and that dangerous nature won’t threaten the pace of innovation.

More P’s and S’s: At this point I am 100% certain there is a totally clear ‘MOAT’ (long term competitive advantage) among AI companies. Their products aren’t too similar - I can clearly identify those with a competitive advantage.

There’s more volatility to come.

See you this weekend,

Andy

Swing Portfolio YTD Performance: +9.72%