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Looking to avoid an overpriced US stock market? Here are some tips from strategists on how to ride the inflation wave

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The fund manager who gambled against US mortgages before the 2008 crisis and recognized GameStop’s deep value sold his stake entirely ahead of the video game retailer’s wild rally. That, and Warren Buffetts’ latest moves, were among the revelations of the wave of 13-F filings Tuesday night to the Securities and Exchange Commission. More on that in a second.

GameStop is now the poster child of the so-called stonks, the seemingly one-sided rise of often desperate actions. Vincent Deluard, Global Macro Director at StoneX, expects the madness to continue. On the one hand, the market is excessively expensive and I am certain that stocks will offer negative real returns over the next decade. On the other hand, the underlying drivers of the bubble are unlikely to disappear in the next few months: the easy money and financial crackdown are here to stay, he says.

A new check for $ 1,400 will likely be in the hands of the Americans by April, special-purpose acquisition companies will have to buy with all the firepower they have amassed, private equity firms and private equity firms. venture capitalists have nearly $ 2 trillion in dry powder. , and many interrupted company share buyback programs will continue, he said.

In the United States, the fiscal and monetary authorities have inflated a huge stone bubble. Ultimately, Europeans will have savings under their mattresses, Asians will have even more productive assets, and Americans will have fun memes, Deluard says.

Inflation, which investors increasingly bet on, is the obvious answer to the problems the United States faces. Inflation will act as a debt jubilee, restore the balance between young asset owners and poor young people, and allow a stealthy default on the unfunded liabilities that the boomer generation has taken for themselves, he writes.

What will a period of inflation benefit from? Deluard has some interesting ideas. Latin American currencies already reflect a decade of weakness and a very weak response to the COVID-19 pandemic. On a raw material export model, the real Brazil BRLUSD,

is 37% undervalued. The Chilean peso CLPUSD,
-0.43
is 20% below its March high, while its main export, copper HG00,
-0.57%,
is 15% above its 2018 high.

Deluard says it makes more sense to compare Latin American stock prices now to the decade 2000-2010. The 2010s were a lost decade for Latin America: commodity prices collapsed and the US dollar strengthened, a horrific combo for commodity exporters indebted in USD. If, as I believe, the 2020s will look like the 2000s (weak dollar, reflation, emerging market outperformance, value and inflation-sensitive sectors), the denominator of Shiller’s P / E needs to be shifted by a decade. , he said.

After completing his Shiller shift, MSCI Brazil 907600,

trades with only 8 times the profits, compared to 48 times the profits in the US

The same analysis finds Spain 972400,
-0.73%
is also inexpensive, at 10.5 times the profits. Spain will get funding under the Next Generation European Union plan, could see immigration as the job of anywhere, and its main banks, Santander and BBVA, have significant holdings in America Latin. Just as COVID has accelerated the migration from Wall Street to Florida, Spain, with its cheap housing, vibrant culture, and fantastic beaches, will attract many highly paid professionals from Northern Europe and the UK (the Brexit will help too), he says. .

The buzz

Retail sales jumped 5.3% in January, a gain well above the 1% increase seen in an economist poll. Producer prices also rose more than expected, rising 1.3%.

Some 2.9 million Texans had no power on Wednesday morning, according to the PowerOutage website. Tesla TSLA,
-2.44%
General Manager Elon Musk expressed his frustration on Twitter TWTR,
+ 2.87%,
and former presidential candidate Beto ORourke said we are approaching a failed state in Texas.

Warren Buffetts Berkshire Hathaway BRK.B,
+ 1.16%
reduced its position in iPhone maker Apple AAPL,
-1.61%
still by far its largest stake while taking new stakes in telecoms Verizon Communications VZ,
-0.09%
and oil producer Chevron CVX,
+ 2.05%,
its latest 13-F filing with the Securities and Exchange Commission shows. Verizon and Chevron both increased in pre-market commerce, while Apple fell.

Scion Asset Management led by Michael Burry, the fund manager popularized in The Big Short for betting against mortgages before the mortgage crisis in the United States, sold to GameStop GME,
-5.52%
before his lightning move, his 13-F shows up. He bought call options in banking giant Citigroup C,
+ 0.77%,
Pfizer PFE pharmaceutical,
-0.09%,
and food manufacturer Kraft Heinz. KHC,
-0.08%
Other filings showed that Point72 Asset Management, the hedge fund managed by Steven A. Cohen, owner of the New York Mets, was buying a put option on the SPDR S&P Biotech ETF XBI,
-2.53%,
and Bill Ackmans Pershing Square reducing its stake in home improvement chain Lowes LOW,
-1.75%
and the restaurateur Restaurant Brands QSR,
+ 0.42%.

Sundial Growers Cannabis Company SNDL,
+ 5.29%
filed a mixed shelf allowing it to sell $ 1 billion in stock or warrants.

The steps

After the huge spike in the 10-year Treasury yield TMUBMUSD10Y on Tuesday,
1.298%
the most since Pfizer first declared in November 2020 that its COVID-19 vaccine was effective, benchmark U.S. debt was returning 1.32%.

ES00 US equity futures contracts,
-0.45%
were a little lower. GC00 Gold Futures,
-1.30%
were trading for less than $ 1,800 an ounce, while Bitcoin BTC.1 futures contracts,
+ 5.40%
were trading above $ 51,000

Table

Via Scott Grannis from the Pundit of Calafia beach, here is the ratio of the price of copper to gold, relative to the yield of the 10-year Treasury. This chart suggests that interest rates are just starting to rise. Copper and almost all other commodities have risen sharply since last March; Crude oil prices have almost tripled over the same period, he says.

Random readings

Probably used for royal funeral rites, a 5000 year old brewery was found in the ancient Egyptian city of Abydos.

Tiny wasps are being deployed in a historic mansion to prevent moths from damaging treasures.

Etna has erupted again, closing the nearby Catania airport.

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