Blog Archives

Alternative Markets update december 2020

21/12/2020

Alternative Markets Update December 2020
Unsurprisingly, BTC tops this chart with an annualized return of 206.4% and a great 2020 so far with 188%. The next most successful asset class are US stocks with an annualized return above 10%, as well as being up more 16% for 2020. Our equities rose on average 7.6%, with two strategies performing exceptionally well. The Long / Short US Equities Consumers, TMT, Healthcare strategy and the Long / Short US Equities Disruptive Technologies strategies are both up more than 57%. Gold that ranks third in this year’s return, despite a continued fall since reaching its peak in August, is the third worst performing asset class over the last ten years, even though it retuned 17.9% and 22.4% in 2019 and 2020. The worst performing asset class are other commodities with an annualized return of -6% over the last ten years.

Figure 1: Asset Class Total Returns over the Last 10 Years, Source: Compound & Charlie Bilello, December 2020

Commodities, aside from gold, mostly had a bad year. Figure 3 shows how commodities have developed in comparison to the US stock market. The essence is that commodities have never been worth so little in comparison to equities and after each crisis, there was a huge turning point. The worst start in 2020 certainly had oil, whose futures (WTI Crude) went negative when the crisis picked of steam in developed economies, which was thought to be impossible. It then recovered fairly quickly and stabilized at $40 for WTI Crude ever since, which was the case for most commodities. Towards the end of November, it started to surge again and continued to do so in December and is currently at $47 per barrel. A major driver for this development is certainly the start of vaccinations and the expectations of going back to normal relatively soon. Brent crude oil experienced a similar rally, although it started to soar earlier and thus gained a bit more than WTI. Brent Crude is now trading at $50 per barrel. Another commodity that has recovered very well is copper. It is trading at 7,068$/mt and has just slightly surpassed its highs from early 2018. During the crisis, it was trading at around 5,000$/mt. Furthermore, the price of copper is unlikely to decrease in the near future, as the stockpiles have not been as low since 2014

Figure 3: GSCITR Commodity Index / S&P 500 Ratio, Source: Andrews Gwynne & Incrementum, December 2020

Figure 4: Crude Futures Front Month Close, Source: Andrews Gwynne & IEA, December 2020

Alternative Markets Update December 2020 - Macro and Political Outlook December 2020 by Macro Eagle

6/12/2020

Alternative Markets Update December 2020
The following Figure shows the 30Y return of the best performing stocks in the S&P 500 during the last 30 years. According to Paul Tudor Jones, BTC can be viewed similarly as internet stocks back in 1999. He argues that these kinds of assets are similar, as there is or was no appropriate to measure their value, as it is currently the case for cryptocurrencies and has been in 1990 with internet-related stocks. Their returns also look similar, as they rose extremely quickly but had a major crash. For BTC that would 2018 and for the internet stocks it is known as the dot-com bubble in 2000. However, both assets have recovered quickly. Internet stocks are now the most valuable stocks like FAANG and ATM in China and it does not seem unlikely that a similar development could occur for cryptocurrencies. Therefore, the two major cryptocurrencies BTC and Ethereum (ETH) are compared to Figure 3. As a basis, the value of a cryptocurrency at inception is seen as its first trade. For BTC this would be a value of $0.000994. The first known sale of BTC in exchange for fiat occurred on Oct. 12 2009 when Finnish developer Martti Malmi sold 5,050 BTC for $5.02, with the fiat amount transferred via Paypal. For BTC, this leads to a staggering return since its inception of 1’919’430’484% over 11 years and easily tops the stock return list. For ETH this value is 204’962%, which would make the stock list on fourth place after Bitcoin, AMZN, MNST and JKHY within 6 years of the first traded price. ETH’s sale started on July 22 2014 at midnight in Switzerland. At the start of the sale and for fourteen days the price was set so that one BTC bought 2,000 ETH. At the end of the 14-day period the amount would decline linearly to a final rate of 1,337 ETH, which meant that one ether was worth 0.0007479 BTC or about $0.29 at BTC prices in September 2014. This would lead to annualized return for BTC of 459% and an annualized return for ETH of 356%. If looking at annualized return, these two cryptocurrencies take the first two positions easily.

Figure 3: Best Perfoming Stocks in the S&P 500 in the Last 30 Years, Source: Compound & YCharts, December 2020

Macro and Political Outlook December 2020 by Macro Eagle
THE YEAR AHEAD
After the sharpest global economic downturn since WW2 (-4%), next year the West will hope that the 2020-stimulus plus vaccine-rollout leads to an economic rebound without pushing yields higher (Debt Crisis? What debt crisis?). On the big themes, I think the “K-nature” of the Covid recovery has some serious political risks (more below). I do think the love for all digital will continue, but beware of BigTech valuations and regulatory Tech-lash. Climate change will continue to drive the agenda, but beware of the ESG bubble. And as for geopolitics with Biden – I expect him to be as tough with China as Trump, just more polite. Apart from the US transition (more below) and China’s next 5-Year-Plan (more below) the two countries to watch are: post-Brexit Britain (more below) and Merkel-Daemmerung Germany (more below).

Figure 9: Major Upcoming Events in December, Source: Macro Eagle, December 2020

Figure 10: Major Upcoming Events in 2021, Source: Macro Eagle, December 2020

Alternative Markets update december 2020

Alternative Markets Update December 2020 - Macro and Political Outlook December 2020 by Macro Eagle

​Archives

Categories

Archives