YWR: Killer Charts
It’s a holiday weekend so I’ve put together a YWR chart pack for you. It’s 72 slides from Goldman, BofA Fund Manager Survey, Xiaomi, Swiss Re and Coinbase.
The link to the full deck is at the bottom.
Here are some highlights.
Sentiment and Positioning
After a dip in April we are back to bullish sentiment and positioning.
CTA’s: CTA positioning is increasingly important. Portfolio turnover at mutual funds and hedge funds continues to drop, which means with nobody else trading, sudden, multi-billion moves by CTA’s really drive the market.
CTA’s aren’t max long, but close. Any 2std move down in the markets will shake out $100bn in long positioning.
Institutional tech underweight: Goldman has some great slides on hedge fund and mutual sector sector positioning in the deck. I was surprised at the big underweight in tech at both hedge funds and mutual funds. It kind of made me wonder if we should be more bullish on tech.
Cash levels: We’ve finally seen a big drop in fund cash levels. It took a 2 year rally to get there. Fund managers are catching up to retail bullishness.
The rest of the BofA Survey charts are in the deck.
S&P 500 Earnings
Earnings estimates are amazingly steady. In 2025 the S&P 500 EPS grows 14%.
The forward 12 month EPS grinds steadily upward.
Insurance Pricing
People have noticed car and home insurance prices are rising rapidly, and in Florida and California it’s getting harder to find home insurance coverage.
Naturally, we should be thinking how to make money from this.
Reinsurers might be the answer.
It turns out insurance companies are tired of losing money, and are trying to catch up with the inflation in claims costs.
After averaging $30-60bn year from 1995-2016, nat cat claims have been over $100bn/year (2017-2022).
Reinsurers like Swiss Re have increased global reinsurance pricing 40% since 2017. For some US exposures they’ve raise prices over 100%.
The growth of litigation hedge funds, and large class action suits has consequences.
Reinsurers like Swiss Re don’t want to be involved in the US. They are raising prices and cutting exposure, which is why people complain they can’t find coverage (or the price is too high).
I’m considering if Swiss Re could be a new Dirty Dividend. Reinsurers are benefitting from two trends. First, they are raising prices, and second their investment portfolios are benefitting as they gradually reinvest at higher interest rates. Swiss Re’s dividend yield (LTM) is 5.7%, but after the good results they are seeing I expect the 2024 dividend will be higher than 6.4/share (CHF 7?).
I’ve put more slides in the deck from their Investor Day in December.
Xiaomi, the biggest EV/Smartphone/Refrigerator/TV/AI Company you’ve never heard of.
We’re going to talk more about Xiaomi in a future post, because listening to the Baidu earnings call and learning about Xiaomi I’ve had an insight into Chinese tech.
But for now just take in this cool looking car from a company you’ve never heard of. To me it resembles the styling of a Maserati.
I think we’re in trouble.
Xioami’s stated goal is to be a top 5 global car company. Which seems ambitious, but then they’re already the 3rd largest mobile phone manufacturer with 13% market share.
Xiaomi was a volume player, but have recently decided to focus on premiumisation and moving up market with the 14 Ultra phone. It looks like that’s what they are doing with the car design too.
Does this resemble the 1980’s Japan playbook?
Digital Assets: The best performing, uncorrelated, $2.5 trillion dollar asset class institutions don’t own.
We’ve been going over the Megafunds overweight in private equity, but what’s something they don’t own, but should?
Digital assets. It’s a $2.5 trillion market, super tech, and now approved by the US regulators.
Bitcoin has been the top performing asset in 7 of the last 11 years.
The PM’s might not like Bitcoin,but the quants in the risk department will notice adding Bitcoin or Ethereum to a traditional 60/40 portfolio improves the return and the Sharpe Ratio.
Would the Dave Swensen of 2024 be buying digital assets and selling private equity?
Have fun this weekend.
Below is a link to the full chart deck with 72 slides.