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Why Amazon May Fill Its Own Shopping Cart With Buybacks


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03 February 2021


Video commentary for February 2nd 2021

Some of the topics discussed include: ethereum hits new all-time high, bitcoin playing catch up, silver pulls back as margin requirements are hiked, India fiscal stimulus announced, stock markets steady, bonds ease, Dollar firms.

India Spending Bonanza Powers Stocks as Valuations Take Backseat

This article by Subhadip Sircar and Kartik Goyal for Bloomberg may be of interest to subscribers. Here is a section:

Stock-market sentiment has also been buoyed by the absence of new taxes on the wealthy and corporations in the budget. Traders expect the government’s growth push to boost corporate profits, which are already showing signs of a recovery. As the results season continues, 21 of the 29 NSE Nifty 50 firms that have reported earnings so far have beaten analyst estimates.

If the budget measures are executed properly, they have the potential to increase the share of corporate profits in GDP, and help bring about a new private investment cycle, recovery in domestic equity flows and earnings growth, analysts at Morgan Stanley wrote in a note.


Eoin Treacy’s view

The time to go big on fiscal spending is during a recession. It will mean the economy moves back into expansion mode quicker than might otherwise be case. Pushing out the ambition to contract the fiscal deficit by another few years was unavoidable and the stability of the Rupee suggests investors are reasonably comfortable with that idea.


Why Amazon May Fill Its Own Shopping Cart With Buybacks

This note from Bloomberg may be of interest to subscribers. Here is a section: Inc.’s equity performance has far exceeded the S&P 500 Index over the past five years, yet buybacks may be the best use of capital in the near term as financial flexibility grows and excess cash builds, according to Bloomberg Intelligence’s Robert Schiffman. With consensus free cash of almost $42 billion in 2021 and $58 billion in 2022 — the e-commerce giant’s share-repurchase authority has gone unused since 2016 — cash could exceed $100 billion over the next two years. The company is scheduled to report fourth-quarter earnings after the close of trading Tuesday.


Eoin Treacy’s view

Some of the largest tech companies like Alphabet and Amazon do not buy back many of their shares. That hasn’t impeded investor enthusiasm because they have been able to continue to deliver on growth and new product offerings.


U.S. nuclear: delayed closures could add 26Mlbs to 2021-30 global uranium demand

Thanks to a subscriber for this report from BoA Securities. Here is a section:


Eoin Treacy’s view

A link to the full report is posted in the  Subscriber’s Area. 

The uranium sector has had a number of false dawns over the last decades. The reason for an inability to reach escape trajectory from the lengthy base formations was KazAtom’s policy of flooding the market and driving high-cost producers out of business.


Silver, GameStop Sink as Investor Frenzy Shows Signs of Cooling

This article from Bloomberg news may be of interest to subscribers. Here is a section:

Most-active silver futures declined as much as 5.5% to $27.81 an ounce on the Comex after the CME Group said margins will rise to $16,500 per contract from $14,000, effective Feb. 2. The decision was based on “the normal review of market volatility to ensure adequate collateral coverage,” it said.

“Fundamentally I don’t believe that there are any significant short positions in the silver market, as the outlook for silver is robust this year, coming off a strong performance in 2020,” Wendt said.

As the frenzy built, BlackRock Inc.’s iShares Silver Trust recorded an unprecedented $944 million net inflow on Friday, followed by another $551 million on Monday after a since-removed post appeared on the WallStreetBets forum that encouraged traders to pile into the exchange-traded product. That move now appears to be fizzling out, with some on Reddit urging their fellow investors to back away from silver.

“We suspect that prices will remain volatile,” James Steel, chief precious metals analyst at HSBC Securities (USA) Inc., said in a note before the margin increase was announced. “Beyond this week, and possibly sooner, we believe the new entrants into the market may tire and begin to liquidate silver holdings, with a commensurate price impact. Buyer beware!”


Eoin Treacy’s view

Raising margin requirements for futures trades always has an impact on prices. It’s the primary tool used by exchanges to ensure orderly markets and it has had a negative effect on silver today. That helps to confirm resistance in the region of the upper side of the range and suggests some additional consolidation is likely.


Email of the day on why GameStop does not sell additional shares

I did not check, but I guess GME did not have a shelf registration which allows a swift sale of securities.

Last week, AMC and AA did use such registration to raise fresh equity. In addition, Silver Capital did convert its $600 MM convertible bond and racked a $100 MM profit: I do believe that they sold short the stock and covered it with the conversion of the CB: opportunistic, sensible and well done!


Eoin Treacy’s view

Thank you for this insightful email.


Eoin’s personal portfolio – stop triggered on hedge position

Eoin Treacy’s view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change.


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