Blue Creek Capital Investor Note #2
Dear Valued Investor,
With the first few months under our belt, we look back on a very steady performance while the world around us has been in pure pandemonium. In times like this, investors could almost feel behind the curve unless they’ve doubled their investments in some of the retail frenzy stocks.
First and foremost, though, we welcome all of our new investors and highly appreciate the trust you put in us! We consider our investor base a key competitive advantage and feel very privileged to have you as a backbone! It is our goal to provide you with the most amount of transparency, so you know the hands that manage your funds. I will never get tired of expressing my appreciation!
There’s one theme in the treasury markets that I simply cannot get away from: the actual willingness to under-play it by the Fed. Sheer cheek of the FOMC to let the mid-curve be the inflation leader. As chairman Powell said in the last press conference: “Inflation is actually much easier to manage than no inflation, some inflation we welcome.”
I don’t actually think this is a bad approach by the reserve bank; control the front-end of the curve under the ‘Covid’ Rescue Ranger remit and let the 5’s 10’s dance with the inflation devil as they pray for sense to prevail on the long end. BCCM will be looking to capture some of this move up in 10-Year Yields.
In the chart below, we see the 10 Year note contract represented as a yield future (a neat offering by The Small Exchange.) While 2’s have held very firm, (1) marks the yield low at the 27th FOMC press conference that was followed by an 11 basis points rally during Chair Powell’s podium appearance.
We are actively looking for yield expansion opportunities in Q1-21 and into Q2-21.
Until financial conditions weaken, cheap funding will keep equities dizzy with optimism and this is unlikely to change in the near term. With accommodative policies in the driver’s seat, our opinion will change when and if the facts change.
I do not want to dwell on the Covid impact as markets are clearly looking through dire economic times with a rose-tinted lens. I will say that we are monitoring nations with the quickest vaccine rollouts (UK/Israel) relative to much slower distributions such as in France. Whatever normality is going to look like, vaccines appear to be a near term source of edge.
Extreme weakness in EUR/GBP is being attributed to the vaccine differential
I hope the current wave of lockdowns have not dampened your spirits too much for 2021 and we will hopefully be able to toast a beer in a bar soon.
President & CIO
Blue Creek Capital Management, LLC
PS. I got through all of this without mentioning r/wallstreetbets since these events do not really impact what we do and or how we allocate. But like you, we have been watching from the side-lines. Whether this will be the start of a wider change or just the script for another movie, we all wait with bated breath.