Daily Brief – Pairs Trading

Pairs Trading

Back in the days when I worked in Bermuda for a hedge fund, we were always seeking stocks that were overvalued and other stocks that were undervalued having analysed both sets of historical price behaviours. Normally those stocks were in the same industry but not necessarily in the same geographic region. In the first quarter of 2025 a good trade would have been shorting EV auto stock Tesla and going long of Chinese EV auto stock BYD. To date that would have generated +39% on Tesla mainly due to a collapse in its sales plus founder Elon Musk’s drop in popularity and +62% on BYD on good results and similarly due to Tesla’s drop in sales. So a 101% increase in total or a handy double.

GBP/USD 1.2920.

Bright Spot

Spain is the poster child for EU economic growth in 2024 with a gain of 3.2%. That compares with +0.9% as the EU average and outpaces the other large EU economies of Germany, France and Italy with -0.2%, +1.1% and +0.7% respectively. Spain is roaring ahead fuelled by a mixture of domestic demand and robust tourism. The only countries that outstrip Spain are the much smaller economies of Malta +6%, Croatia +3.8% and Cyrus +3.4%. Not to be forgotten is the adrenaline boost to Spain provided by almost EUR 48 billion of EU Grants.

EUR/USD 1.0770.

Preparedness Union Strategy

The PUS acronym from EU HQ may have escaped you. This is the measure that is suggested to be rolled out across the EU which will require all member states to equip all of their respective citizens with a 72 hour survival kit to deal with emergencies ranging from Covid to natural disasters to industrial accidents to military actions. The kit will include pretty much everything one can imagine: food, water, medicines, torch, batteries, important documents, clothes, chargers, tools, a radio, cash and spare keys. We might add gold to that gloomy roll call: USD 3077 should you want to buy a troy ounce.

EUR/JPY 162.60.

Casks of Whisky-or not

As could have been confidently predicted, those glossy advertisements for above market investment returns from buying casks of whisky have attracted bad behaviours with at best the casks and the whisky being overpriced, and at worst them not existing. Companies assisting the police include Cask Whisky Ltd, Cask Spirits Global Ltd and Whisky Scotland. While there are some legitimate companies in the sector, since it is unregulated it is hard to know which are bona fide.

GBP/EUR 1.1989.

We Are The World

This day in 1985 as part of the pop world’s push to raise money to counter famine in Africa, this song was co-written by Michael Jackson and Lionel Richie and sung by the royal family of pop and rock. For those impressed by logistical organisation, despite the apparently ramshackle lifestyles of the artistes they succeeded in getting the song played by 6,000 radio stations in the USA and Canada……simultaneously!

Lionel Richie:
There comes a time when we heed a certain call

Lionel Richie & Stevie Wonder:
When the world must come together as one

Stevie Wonder:
There are people dying

Paul Simon:
And its time to lend a hand to life

Paul Simon & Kenny Rogers:
The greatest gift of all

Kenny Rogers:
We cant go on pretending day by day

James Ingram:
That someone, somewhere will soon make a change

Tina Turner:
We are all part of gods great big family

Billy Joel:
And the truth, you know, love is all we need

Chorus:
Michael Jackson:
We are the world, we are the children
We are the ones who make a brighter day
So lets start giving

Diana Ross:
Theres a choice were making
Were saving our own lives

Michael & Diana Ross:
Its true well make a better day
Just you and me

Dionne Warwick:
Send them your heart
So theyll know that someone cares

Dionne Warwick & Willie Nelson:
And their lives will be stronger and free

Willie Nelson:
As God has shown us by turning stones to bread

Al Jarreau:
So we all must lend a helping hand

Chorus:
We are the world, we are the children
We are the ones who make a brighter day
So lets start giving

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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