Daniel Loeb latest investment letter reveals that Wall Street limelight activist investors experienced a challenging start to 2023.
Message to Investors;
“First Quarter performance was disappointing, in keeping with the past several quarters of losses that are inconsistent with the results we have delivered for the past 28 years,” wrote Daniel Loeb.
“First Quarter performance was disappointing, in keeping with the past several quarters of losses that are inconsistent with the results we have delivered for the past 28 years”
DANIEL LOEB
The first quarter will be known for four bank failures Daniel Loeb latest investment letter notes
Indeed, the worst bank run since the 20s Great Depression barely made a blip on the mainstream radar. But the Fed wants you to know there is nothing to see here, bearing in mind 23 of the US largest banks passed its stress test last month, June 28.
The Fed’s Reverse Repo is still slightly below $2 trillion near record highs. Think about it. If banks were healthy, would they need nearly $2 trillion daily of the Fed’s emergency funding to remain liquid?
Is this a restrictive monetary policy? The banking cartel gets 2 trillion dollars a day of emergency funding. Meanwhile, Joe public mortgage has more than doubled in 18 months, and he is left holding the inflation can.
But in today’s simulated reality, banks have passed the Fed’s stress tests. So the system is as stable as a shiny yellow rock, and the mainstream parrots keep repeating that, so it must be true.
We live in a fabricated reality no longer based on facts.
“The banking cartel gets 2 trillion dollars a day of emergency funding”
WEALTH TRAINING COMPANY
The banking crisis, which is still ongoing, was predictable, according to Daniel Loeb latest investment letter.
“The Quarter will be remembered for the failure of Silicon Valley Bank and the contagion that followed, which felt like the shoe finally dropping after twelve consecutive quarters of Fed tightening. It was shocking and yet predictable – like watching a rubber band being stretched and stretched until finally, it snaps,” he wrote.
But the elasticity breaking point worth keeping an eye on is at what level of stress will society snap. Is what we are seeing in France an indication of society near breakpoint, the beginning of a global uprising?
Perhaps it is nothing more than the rebellious French who like a good riot.
“The top five winners for the quarter were Salesforce Inc., Advanced Micro Devices, LVMH, The Walt Disney Co., and Microsoft Corp” – Daniel Loeb
Daniel Loeb latest investment letter highlights variations in the performance of sectors in Q1
“Sector dispersion was high, with Info Tech and Communications, (which were down 29% and 40% in 2022) outperforming Financials and Energy by over 25%. Large-cap Tech companies that underperformed dramatically last year – such as NVDA, TSLA, META, AMD and CRM – drove a disproportionate percentage of the gains for the overall indices (the equal-weighted S&P index was up only 2.6% in Q1),” he wrote.
Bearish bets weighed on the portfolio performance, according to Daniel Loeb latest investment letter
“Shorts and hedges have been a significant drag on performance, costing us approximately 4% in the first quarter,” he wrote.
If the Fed wants to simulate a soft landing, financial markets could continue to gradually recover losses of 2022, while Main Street bleeds, particularly real estate, which impacts the wealth effect and spending, thereby crushing inflation. But if the Fed wants another Great Depression, they will let everything crash in a type of nose dive headfirst impact.
If you believe the former, then shorts could continue to bleed.
Daniel Loeb latest investment letter revealed the best performers and the dogs
“The top five winners for the quarter were Salesforce Inc., Advanced Micro Devices, LVMH, The Walt Disney Co., and Microsoft Corp.
The top five losers for the quarter were Fidelity National Information Services, American International Group Inc., Bath & Body Works Inc., Glencore International PLC, and Alphabet Inc,” he wrote.
“Looking ahead, we see some encouraging signs that inflation is moderating,” wrote Daniel Loeb.
“Fears around the potentially negative impact that AI and ChatGPT/MSFT may have on GOOGL’s business created a unique entry point into one of the best consumer internet assets and businesses of our generation” – Daniel Loeb
Risk of Fed breaking things; Daniel Loeb latest investment letter revelled
“While monetary policy has been firmly contractionary, fiscal policy remains incredibly supportive. With monetary policy and fiscal policy essentially pushing in opposite directions, monetary policy is likely to remain tight for longer than would otherwise be necessary. Asset prices are much more sensitive to monetary policy than fiscal, and so this push-pull dynamic is creating risk of the Fed “breaking things” in the asset markets, the long-looming concern we finally saw begin to manifest in the regional banking crisis,” he wrote.
Daniel Loeb latest investment letter revealed the fund’s strategy;
“Our strategy is to preserve liquidity and buying power to take advantage of markets when they “break”. While overall indices remain elevated, we are finding more chances to provide liquidity across all three asset classes in which we invest – credit, structured credit, and equity – opportunities which have been key drivers of performance for the fund. Our portfolio is balanced across industries with a focus on event-driven names including companies involved in spin-offs, significant cost-cutting, or other types of under-appreciated business transformation. PCG, which is still our largest position, continues to deliver strong results,” he wrote.
New Position, according to Daniel Loeb latest investment letter
UBS; “We initiated a position in the Op Co and Hold Co paper of Credit Suisse just before its takeover announcement by UBS.
New Position: Alphabet (GOOGL)
“Third Point initiated a position in GOOGL during the First Quarter. Fears around the potentially negative impact that AI and ChatGPT/MSFT may have on GOOGL’s business created a unique entry point into one of the best consumer internet assets and businesses of our generation.
We believe the market underestimates GOOGL’s capabilities and opportunities in the emerging field of generative AI. GOOGLE has been a leader in the broad field of AI for years.
We believe the market underestimates the impact of GOOGL’s other initiatives, such as optimizing computer infrastructure, rationalizing its real estate footprint, and leveraging AI to drive automation across the organization.
Credit
Both areas of credit (corporate and structured) contributed positively to First Quarter performance. While corporate credit spreads have been relatively range-bound generally, we continue to see periods of higher volatility that are creating interesting entry points.
We remain highly constructive on our residential mortgage trade because of the historically low loan to values, where borrowers have 40-50% equity in their homes locked at a fixed rate below 5%.,” he wrote.
