Markets Can't Ignore Logistics Constraints

Nikkei Chart

We just wanted to post a quick note, often times we have our ideas and we get too caught up in the day and we can’t write as much or as often as we like. So instead, maybe when the light bulb goes off we will post our initial thought which will pave the way for a longer more substantive letter later on.

Magnelibra believes that the market has shunned some major fundamental and structural global market deficiencies. It is an obvious constraint when the central banks rhetoric includes the word “taper” however its less and more obscure when something like logistics comes into play. We have been following this story ever since Covid. Perhaps Covid was just an excuse for global shipping and rather its a structural and societal ongoing issue that has yet to be dealt with. The semiconductor shortage is real and is affecting almost every single industry and this is a very, very big deal.

Each week we hear about loss of production due to supply issues, which for us longer term thinkers, we know this means one major thing…Loss of Revenue. What it also means is that this kind of structural disruption is not “transitory” but rather long lasting and you just can’t build new factories over night, nor mine new materials and get them to where they need to be in order to be synthesized into a viable component.

So with that said, Magnelibra is taking the stance that despite all the global free money leading to obvious concentrations of debt wealth, real structural supply and market forces are going to wreak havoc on global corporations whose very existence relies solely on razor thin margins and tight supply controls. The days of big stockpiles is over and what we are seeing now is not new, but rather a massive headwind that has been in the making for years!

So with that we will post one chart here, the Nikkei. We noted its breakout in November last year as technically significant and we will note that cruising altitude now at 30,000 ft seems to be enough of a headwind to dip the nose a bit and return back to our 8 year long trend channel:

This is not saying monetary printing presses can’t keep the game up and the markets rigged and propped, rather we can only surmise the value players are not going to be here and sometimes even the big dogs need to take profit. Rinse, recycle, repeat…

Stay tuned for a more in depth dive into the logistics issue which we feel is not being accurately discounted by global equities at this point.

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-Magnelibra Econemotions

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