Topley’s Top 10 – July 07, 2022

1. Publicly Traded Warehouse Companies -30%+ Corrections

TRNO -35%

EGP -33%

2. One Month Solar Stocks -4% vs. Energy -22%

TAN solar ETF vs. XLE energy ETF

3. Buy Now Pay Later Swedish Unicorn Klarna Valuation $45B to $6B

Valuation re-set for valuation as borrowing costs spike

4. 20 Day Move in Commodities Third Largest Decline in 90 Years

Jim Reid Deutsche Bank-Earlier this year commodities and bonds saw some of their biggest moves for decades, or all time in some cases, mostly in the direction of higher yields and commodity prices.

Over the last few days, these big moves are back again but mostly in the other direction as recession fears mount and central bank expectations are pared back.

The rolling 20-day move in our commodity index is now seeing around the third largest decline in 90 years (hat tip to DB’s Tom Sykes for pointing out), behind only the GFC, the initial Covid shock, and on a par with that seen in the early days of WWII in 1940. In March, we saw the fourth largest 20-day uptick after the Russian invasion of Ukraine. The start of WWII and two occasions in the 1970s were the only bigger moves.

In addition, 10yr bunds have seen their joint largest 10-day fall in yields since reunification, equalling a move seen during the GFC.

2022 has seen many such moves across many different asset classes and as such will go down as one of the most volatile years for financial markets on record.

5. 20 Year Treasury Bond -23% Correction

Another bond chart 50 week thru 200 week to downside

6. Euro Zone Inflation 8.6% vs. Interest Rates Negative

@Charlie Bilello Eurozone inflation has moved up to 8.6%, its highest level ever. Meanwhile, the ECB is still holding interest rates at negative levels. This is perhaps the greatest disconnect between easy monetary policy and unabating rising prices that the world has ever seen.

7. Above Leading to 20 Year Low in Euro vs. Dollar

EURO breaks to new lows

8. Utility Stocks and Semiconductor Stocks Now Have the Same Forward P/E Ratio 20x

This chart shows XLU utility ETF vs. SMH semiconductor ETF this year….outperformance by utilities led to reversion in valuations

9. Tesla and China Competition


Last week we discussed how Nike was struggling with its business in China — today it’s Tesla’s turn.

The electric vehicle maker reported that it had delivered just over 250,000 cars globally, an 18% drop on the effort from Q1 when the company had shipped more than 310,000.

Like Nike, Tesla has been struggling with COVID restrictions at its factories. Tesla’s Shanghai factory — known as the Giga Shanghai — had to close multiple times in the first quarter, and broader supply chain constraints like the computer chip shortage haven’t helped either.

Tesla’s minor hiccup follows years of remarkable progress that made it the largest EV manufacturer in the world. But just as it struggles with its operations in China, it’s also facing rising competition from within the country. Chinese rival BYD reported just this week that it sold 641,000 EVs in the first six months of this year, more than Tesla’s 565,000, leading some to proclaim that Tesla has officially been dethroned as the world’s largest EV maker.

Technically some of those BYD sales were not fullbattery electric vehicles, with some hybrid sales included, so the distinction is slightly muddled. Nonetheless, the competition is coming — and, crucially, consumers are expecting it; data from Morning Consult showed that consumers expect to have the choice of more than 130 EV models by 2024. Back in 2010 they only had a few to choose from.

10. Ted Roosevelt and Bad Luck

The Daily Stoic-In the late 1800s, Theodore Roosevelt was on a hunting trip in Big Hole Basin in Montana. The trip did not get off to a good start. Upon getting off the train, and searching for a wagon to transport them, Roosevelt and his party immediately ran into the first of many issues. The wagon they found was overpriced, the harnesses were rotting and falling apart, and the horses were spoiled and ill-trained. There wasn’t much use in complaining, Roosevelt later wrote in his wonderful hunting memoir, The Wilderness Hunter, because “on the frontier one soon grows to accept little facts of this kind with bland indifference.”

Because what’s the alternative? Let it ruin the trip? Yell at the horses? Fix the harnesses with your anger? In fact, part of the appeal of the outdoors lifestyle is that it’s a challenge and that it tests us in these little ways. Camping and hunting, the Stoics would have said, are both great metaphors and great training for the difficulties of life.

Bad luck continued on the trip, with mishap after mishap. The wagon got mired at various crossings, the horses were a constant struggle, and the weather was freezing. At one point, it looked like the weather was set to take an even more serious turn. Roosevelt turned to his partner and said casually that he would “rather it didn’t storm.” His partner, even more stoic than Roosevelt, stopped his whistling, looked at him and said, “We’re not having our rathers on this trip,” then cheerfully resumed whistling.

The truth is, we don’t get our rathers in life either. All of us are pulled along by Fate, or the logos as the Stoics would call it, as well as by Fortune. Sometimes they line up with what we want, sometimes they don’t. That’s why amor fati is the right attitude. We have to embrace it. We have to accept the little facts of life. Bland indifference is a start, but cheerful whistling is even better.