Birkoa Newsletter (updates end of Nov. 3rd wk '22)
Dear Birkoa LPs:
This is a short update for the week that just passed.
Last week, we were able to build on the progress from the week prior. While I suggested to you that the recovery process will be sharp and swift once these "artificial dampeners" of China COVID Zero and U.S. Fed lift, I've been careful to also mention that that recovery won't always be a straight line up. As a demonstration of that, here's a look at the portfolio from last Tuesday (11/15) and Friday (11/18), that shows the rise up to 54% MTD initially before settling at 41% MTD at the week's closing.
This is a great example of staying patient and waiting for the chips to fall, with the occasional buying of the dips if things get temporarily cheaper. As you know from my prior newsletters, even though my strategy does not trade the markets day in, day out, I do double down on my positions whenever and wherever convenient, regardless of how silly I might look in the short run. That strategy has been helpful in the quick recovery that's currently underway, which is why I feel confident in recovering fully soon just as long as these artificial dampeners lift. Since last week, there've been rise in COVID deaths in China which has led for some of the worries to return, alongside a couple of "tough talk" from certain Fed officials. My guess is these are mere market gyrations and not something we need to be worried about.
Although oil and commodities have taken a leg down due to these Fed-related concerns, I believe the fundamentals of Supply & Demand still work in our favor. Right now, certain non-pro commodity traders have been trading on a worsening demand outlook, which typically don't stand for long in commodities markets.
Last week we also saw Warren Buffett take a stake in one of our semiconductor names - TSMC's U.S. ADR, to the tune of $4 B (I take that as a seal of approval of sorts especially considering I've been bullish on the sector for months now!), followed by a slew of positive forecasts by the analyst community that semis have in general possibly bottomed out, since they're the first casualties of an impending recession in today's world. Since I essentially think of semis as commodities and not tech stocks, I added to our semis position by another 30% today as they're down about 4% since last Tuesday, because the markets have taken a breather the past 3 days.
Once again, the whole point of a macro fund like ours is to stay a few months or years ahead of everyone else, and to the extent that I follow the markets wire-to-wire, I mostly do so as a continuous revision tool should fundamentals on the ground change or as a means to buy more should anything dip unnaturally. Which is why although we've borne the brunt of short-term fluctuations, we're of late recovering quickly and I believe we will continue to do so in the weeks ahead. The compounded effect over 2-3 years will be enormous, as I'll next look to get into the U.S. tech sector within the next month or two. They have hit rock bottom in some cases, and at some point, like Hong Kong stocks, they become too cheap to not buy. But as of right now, given the uncertainties of the Fed and the need to see inflation go down min. one more month, I haven't bought the sector yet instead focusing on adding to our present positions and remaining market-neutral in the process.
Since things are in motion, I didn't want to get too deep today and instead settled on a quick recap of the week that just passed. I hope this enlightens you a bit more about how your money is being put to work and the whys behind it. Our liquidity and maintenance margins remain strong and there's extremely low risk of forced liquidations out of positions we'd like to hold till maturity.
Sincerely,
Pranjit Kalita
CIO