It’s Time To Buy Dirty Coal…

A glittering resume helps a lot in getting a job, but a majority of the winners I have known have undistinguished pedigrees; brains, guts, drive, and intuition put the points on the board. Performance investing is a numbers game. ~ Barton Biggs, “A Hedge Fund Tale of Reach and Grasp” 

Good morning! 

In this week’s Dirty Dozen [CHART PACK]  we look at a leaky ARK, an obvious short, a major inventory shortage, BDI making decade highs, coal on a tear, and a few inverted H&S bottoms, plus more… 

 Let’s dive in. 

 

***click charts to enlarge*** 

 

  1. The retail mob giveth and the retail mob taketh away… After ending 2020 with incredible inflows, the ARK family of ETFs has seen an equally stunning stampede for the exit this year. 

 

  1. The reversal in sentiment is puzzling when looking at some of ARK’s larger fund holdings… darlings like PLTR, which you can own for only 34x sales. That multiple might seem a tad rich, but we must consider that the company is expected to grow those sales 34% this year and see declining sales growth going forward. So that’s something, right?                                                     

I kid, we’re short.

  1. DB making the case for higher yields going into the end of the year. We’re also bearish long bonds looking out over the next month +.

 

 

  1. As you know, we became big gold/silver bulls back in March. We think the market is gearing up for its next major run higher. With that said, important bases often take time to form and gold is up against the upper range of its 10-month bull flag. If yields pop here, we could see gold chop sideways/lower here for a bit. 

 

 

  1. Inventories are at extremely low levels, especially considering the rebound in global growth. DB writes “The risk here is clear. As inventory levels have fallen to multi-decade lows at retailers, there are likely many businesses that will not have enough inventory to satisfy customers as economies recover and pent-up demand is unleashed. This is particularly the case as retailers are far more reliant on just-in-time supply chains than they were in decades past.”

 

  1. Just-in-time might quickly turn into out-of-stock… 

 

 

  1. The Baltic Dry Index just hit 11-year highs with no sign of slowing.

 

 

  1. Many dry bulk shippers have been on a complete tear this year. And now many tanker names are setting up as well. STNG has completed year + inverted H&S bottom. The measured move target is above $30 a share. 

 

 

  1. I’m of the mind that when this Buy Climax ends in the next few weeks/months, we’ll see expensive US stocks chop sideways in an extended range, while cheaper unloved sectors such as staples and utilities start showing relative strength.

 

 

  1. Chinese thermal coal futures are trading at decade highs, as plants increasingly switch to the dirty energy source following higher nat gas prices. 

 

 

  1. Coal prices are now highly competitive in the US, as the below chart shows (h/t @contrarian8888).

 

 

  1. My buddy Chase over at Pinecone Macro as well as the great Twitter follow @contrarian8888, have been all over this trade. US coal producers are probably the most contrarian trade out there right now. And this contra trade is being confirmed by an incredibly bullish tape. BTU just completed a 15-month inverted H&S bottom. 

 

 

Stay safe out there and keep your head on a swivel.

Your Macro Operator, 

Alex

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