MAXIN GLOBAL FUND - USD is a Long / Short Directional hedge Fund incorporated in Luxembourg. It started trading on February,22 2022 and replaces MAXIN ADVISORS' MODEL PORTFOLIO which has been trading since January 1st 2014. At MAXIN ADVISORS, we manage FULLY TRANSPARENTLY and publish the transactions on a DAILY basis and the details of the portfolio on a WEEKLY basis.
February Blues
Our roadmap seems to be unfolding as expected.
Today saw the major topping out we were announcing last week for the end of January leading to a downdraft in February. Most indexes and tech stocks have reversed course marking an intermediary top below the early December high on the SP500.
The speculative froth of the past week has reversed on fears of the Central Bank’s actions this week, where we expect the FED and the ECB to take, at least, a strong hawkish tone re-affirming their dot plot for higher rates in 2023 and the quantitative tightening, and, although less likely, maybe even a surprise 50 basis points hike by the FED in a drive to bring forward the peak of interest rates to quash the irrational hopes of investors.
Some FED members have already advocated such a stance in the past and there is no doubt that the internal debates will be heated at the FED on Wednesday.
A lot of action will Take place in Europe where today saw a surprise jump in Spanish inflation with the largest mismatch with expectations in history, confirming our long stated theses that inflation is not dead, Monetary policies in Europe are way to lax and that any decline in inflation will not be in a straight line.
The other piece of bad news was the surprise contraction of the German economy in Q4 2022 revealed today.
It was not a surprise to us as we have predicted that Europe would fall into recession before the USA, but the data confirms the powerful downtrends triggered by inflation and higher rates.
Germany’s economy shrank 0.2% at the end of last year — a worse outcome than previously flagged and one that makes a recession on the back of rising energy bills more likely after all. The figures Monday from the statistics office contrast with an estimate this month for output to have stagnated in the fourth quarter. They also mean a contraction in the period through March would still produce a recession in the euro area’s largest economy.
Demand is weighed down as surging prices continue to filter through to consumers. That trend was also visible in Sweden, whose economy unexpectedly contracted in the fourth quarter.
The combination of contracting economies and rising inflation is lethal to equities which, in Europe, are trading at unsustainably over-extended levels and we expect this coming week to be crucial for the direction of Bonds, the US dollar, Gold and equity markets going forward.
In the US, the tentative breakouts in the Nasdaq and the Russell 2000 indexes may prove to be a false signal.
We see a correction into February before another tentative rally starts in March driven primarily by technology stocks. This final rebound will have the potential for the SP500 to re-test the 4’100 level, and maybe even extend towards 4250 or 4300 in April, before a sharp bear market leg unfolds into October.
The depth of the February downdraft will depend on the market itself and how quickly sentiment changes.
There are a number of important support levels for both the SP500 and the NASDAQ that should provide the basis for the March/ April rebound, but we cannot exclude entirely a break to the downside towards the October 2022 low, or even sharply lower in case it was broken, if something unexpectedly negative were to happen.
The one thing that makes us worried about potentially more downside than our roadmap implies, is the EXCEPTIONALLY LOW levels of the volatility indexes, usually a sign that sentiment is way too positive and that any piece of negative news coming from the war in Ukraine, an escalation of tensions in the Gulf or yet another financial blowoff could trigger massive liquidations.
When it comes to earnings, more than a third of the S&P 500 has reported fourth-quarter results this month, with earnings for the index so far coming in 3% lower than in the same period a year ago. When excluding the energy sector—which saw its income soar in 2022—S&P 500 earnings are down 7% year over year, according to data from Refinitiv. With two-third of companies having still to report, we expect the decline in earnings to accelerate downward. This week, AAPLE, GOOGL, AMD and NVDA are scheduled to report and we are particularly worried about Apple and the semi-conductors which are industrial companies with very volatile cycles.hines
In last week’s breakout, we cut our short future positions in the US but replaced them by increasing our short positions in high flying technology and industrial stocks such as Boeing or Caterpillar. They will fall more than the indexes in the coming downdraft.
Finally, as we predicted, Chinese equities are marking a major top and we kept on taking profits on our long positions there with our allocation to China is now down to 20 % of the portfolio.
Today, we took profits in Chinese ETFs, auto stocks, airlines and banks, we increased our short positions in Frances’ CAC 40 index, Italy’s Mid index, VINCI, luxury group CHristian Dior and added a new short position in high flying Ferrari, while shorting more German Bunds ahead of the ECB meeting on Thursday.
In the US, we added to our long position in SP500 volatility, and added to our short positions in TESLA, AMD which is reporting its earning tomorrow, the technology SPDR ETF and finally in highly overextended CATERPILLAR.
Lastly, we increased our long position in. natural Gas futures.
Our portfolio in now significantly short, with a 140 % short exposure and a -118 % net short exposure.
We are long the US dollar and short the EUR and GBP, out of US bonds and short European bonds, Short precious metals and very short cryptocurrencies which, have also topped out today, ending their sentiment squeeze.
We have bailed out of Japan and emerging Markets, and are at the lowest exposure to Chinese equities since w launched MAXIN GLOBAL FUND last year, waiting for a pull back to re-instate our long positions in what are still extremely cheap equities.
China’s economic data reported this week showed a strong economic rebound.
China’s manufacturing and services expanded for the first time in four months in January as the reopening
from Covid Zero continued and the Lunar New Year holiday spurred travel and spending.
The manufacturing purchasing managers’ index rose to 50.1 from 47 in December, matching economists’ estimates. The non- manufacturing gauge — which measures activity in both the services and construction sectors — increased to 54.4 from 41.6, topping expectations for 52 in a Bloomberg survey of economists.
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The International Monetary Fund just raised its global economic growth outlook to 2.9%, the first increase in a year, on the back of a sharp upgrade to China’s estimated expansion. It now expects Chinas economy to grow 5.2% in 2023.
Two things are rather certain going into February, Volatility is bound to increase sharply, and the over-optimistic US retail investors will get smashed again, having gone long equities against all economic and fundamental rationales.
MAXIN GLOBAL FUND – USD
Transaction Update 30 Jan 2023
New Asset Allocation
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