Who is the bully now? – Sep 15th 2023

Well, folks, let’s all gather around and celebrate the thrilling performance of the markets this week! It’s been a real hoot, with economic data that was about as surprising as your morning alarm clock. And guess what? The much-anticipated inflation data strutted in, right in line with our oh-so-tame expectations. Of course, we had to adjust for the rise in gasoline prices [CPI YoY 4.3%], because what’s inflation without a little fuel on the fire, right?

But there’s more! The ECB, in their infinite wisdom, raised their depo rate to a whopping 4%, giving the Euro a little nudge toward parity with the good ol’ greenback. Chamonix this winter, anyone? And as for price action, well, it was like a one-man show starring the unstoppable global strength in commodity markets. Crude oil said, “Move over, I’m breaking through $90 per barrel in WTI,” and the entire Energy Sector just smiled and waved.

Naturally, all this commotion has lured out the market’s wise sages and industry experts from their secret lairs. They’re busy regaling us with their profound insights on the current administration’s energy policies and the skyrocketing cost of gasoline across the US. But hey, who could blame them? It’s been a long time coming!

And for those of you who still hold a torch for good old gasoline instead of massive four-wheeled batteries, don’t fret! Our calculations show that gas prices at the pump are practically a drop in the bucket right now. Why, you ask? Well, that’s because while green energy policies are being shoved down our throats, the US oil market has decided to take a permanent nap with no intention of boosting investment or production to secure our daily fix. Smooth transitions? Nah, let’s go for prolonged pain for the average Joe and taxpayer instead! And the FED is off the hook on this one: “low rates, high rates, won’t pump oil, mates!”!

Remember the ’70s embargo when OPEC gave the US a stern time-out for being a bit of a bully? Gas rationing, speed limits, and day light savings time – those were the good old days. It even led to the birth of the Department of Energy in ’77, with dreams of energy independence and abundant reserves. Well, guess what? Those reserves are looking a bit anemic these days, with the SPR holding a mere 20 days’ worth of US crude. Could history repeat itself? A hard maybe. After all, the US isn’t the only one with an appetite for energy this time around. Emerging economies have emerged, and are flexing their muscles, investing heavily in all things industrial, and making sure they have a firm grip on the essentials. And guess what? They’re all cozying up within the ranks of OPEC+. Who’s the bully now, right?

Now, let’s fast forward to a frosty winter, courtesy of El Niño, and guess what’s sticking around like that distant relative who just won’t leave after the holidays? Pricing pressures, my friends. The physical market is so tight it could probably win a limbo contest, and while we did spot some new rigs daring to venture out to pump that sweet $90 oil this week, they remain far and few. High prices for a fleeting moment? Knock, knock – opportunity’s here. High prices for an eternity? Well, that’s the kind of change that could usher in a whole new regime. So, keep those crystal balls gleaming, because who knows what’s lurking around the corner? Fortune favors the bold, or at least those who see it coming!

** Unlocking Hidden Value: The GEO Group’s Remarkable Transformation In A Niche Industry (https://seekingalpha.com/article/4635117-unlocking-hidden-value-geo-group-remarkable-transformation-niche-industry)
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** Commentary from RCG Portfolio Managers
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** Dynamic Macro Strategy
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This strategy relies on historical data and quantitative techniques to detect statistical disparities and make predictions in global markets using highly liquid global, broad, sector, commodity and fixed income ETF’s.

“Active re-balancing to target levels was the theme this week, we took profits on XLI and reduced risk exposure in the portfolio into next week’s FOMC. We also increased our metals position in SLV as it exhausted it’s short term decline. We’ve been trimming and leaning defensively into month end”. – Nick Diaz

** Inflection Strategy
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The strategy takes positions in highly out of favor US equities which we believe are inflecting due to changing fundamentals, events or cyclicality.

“Oil prices have recently surged to almost $90 per barrel due to supply cuts by OPEC+ and increasing demand from countries like China and India. This situation resembles the 1970s with factors such as inflation, Saudi influence, and limited U.S. production. The trend of climate concerns and ESG investments impacting oil supply is expected to continue, favoring discounted energy stocks.” – Stefan Lingmerth

** Unlocking Hidden Value: The GEO Group’s Remarkable Transformation In A Niche Industry (https://seekingalpha.com/article/4635117-unlocking-hidden-value-geo-group-remarkable-transformation-niche-industry)

 

** Safe Haven Strategy
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This strategy protects capital during inflationary environments and seeks to maximize yield using fixed income instruments and defensive assets, such as metals.

“Rates remained range bound with no position changes to this book. We saw some pressure to the belly and long end of the curve after the auctions this week. Additional bill supply to hit the market next week with 2y, 5y and 7y auction into month end. ” – Nick Diaz



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