Supplemental to Birkoa Newsletter 39 (mid-November '23)
Dear Birkoa LPs and Friends,
I wanted to write a supplement to the newsletter from 2 weeks ago today, building on the positive momentum. This will be short and mostly focus on some numbers and what's expected over the immediate short-term. Ultimately, I intend to show why new capital could be primed for the most effective utility in the near term.
We're up over 20% month-to-date as of the end of Friday, with the fund having reached newer heights for the year and overall. This is likely to continue in the short term, especially as inflation numbers this past week came in softer than anticipated. The war in Gaza seems to have at least been contained from further escalation, which has helped calm our positions further. The Federal Reserve faces the exceptional odds of having successfully curbed inflation without throwing the nation into a deep recession, and given the lowering inflation, receding oil prices, and tempered unemployment, they likely are done with their historic tightening cycle.
This means the macro forces align pretty well for our portfolio, especially within AI up and down the ladder. As higher interest rates pressures fade and the Dollar declines from its artificial strength due to lowered bond yields on the 10-year bond, cryptocurrencies and the Blockchain ecosystem would continue to do well and build on their momentum. It is astonishing to observe that almost 90% of our gains have come from these 2 elements of our portfolio, each with further room to run.
China is still not doing anything for us yet due to idiosyncratic reasons; however, the odds of that continuing for another extended period of time are low. The economy unexpectedly posted higher than expected retail sales numbers for October, as reported this past week. The economy has in fact bottomed out and it's merely a matter of time before the markets there reflect it. Thus far we're doing well overall on our portfolio despite China's weakness, and once China participates, we could be getting a double lift. Moreover, given the easy monetary conditions already underway in China, once the Dollar's weakness is sustained, I think we'll see more uncorrelation of China to the U.S. markets in the event of U.S. weakness.
Commodities have been quite weak for us, and quite frankly, despite their considerable weakness (some of our Lithium mining positions are down 40% for example), they aren't even making a dent in our overall PnL. Oil too has weakened considerably even after the war in Israel began; however, these too are expected to recover in the months ahead and are close if not past their absolute local bottoms. Over the weekend, for instance, there was a report out that suggested Saudi Arabia is considering extending their oil cuts into 2024, which is making oil traders bullish on oil again. Commodities too would only find a lot of utility for new capital, and are primed to contribute to the upside now that they've been so depressed.
Other areas of our portfolio like Japan, Brazil, EVs, have been so-so to flat, and I won't stress on them for now. But, those too would only add to our winnings once they are able to break out of this Dollar-strong environment.
Ultimately, my main priority in this supplement is to impress upon the need for prospective investors into our fund to act quickly and see for themselves the opportunities ripe for new capital to be deployed in several segments of our portfolio. Just like I had been communicating with some of you individually during our depths of late-October, now that we're well into newer heights since those bottoms, the initial gains of 5-10% for any new capital could come relatively quickly. I was hoping that highlighting the multitude of potential across our asset categories would help towards ultimately enabling you to invest in our fund sooner rather than later. I'd like nothing else than to see new investors catch the upswing while it's in its early stages of its way up.
Sincerely,
Pranjit Kalita
Chief Investment Officer