fundamentally agree, favourite examples are watching CVT, AIR, and KMD. Still think CO2 is massively undervalued, although it seems to be correcting.
suggest that there are trading - rather than investment - gains to be made though...
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CO2 likely moving due to recent developments finally - recommend subscribing to the Carbon Match newsletter for good summaries of news. Last update June 4th:
NZU Update
So far it has been an exciting week for sellers. Carbon Match had reasonable volume move through yesterday up to the $27.50 mark before the action stopped - buyers and sellers are still feeling their way a little and the bid-ask spread had widened to about $1 cf our more usual 10-15 cents.
While that is to be expected in the wake of about 500 pages of new reading material, we now need both buyers and sellers alike to take a view, share that view on screen and contribute to the price discovery that is so important as we move towards what is a whole new basis for this market.
Many buyers, having handed in units only last week under the $25 FPO setting, now need to buy, with the $35 fixed price option both a motivator and a simple backstop.
While the asking prices at these new much higher levels might initially seem confronting to buyers, obviously the $35 is a mark that has lifted the horizon and refocused the minds of natural sellers.
Yes there is no guarantee that the price will necessarily get there ahead of next year but there is also no question that these announcements, once formally legislated, will serve up a new normal for carbon over the coming months, at least until auctions begin.
With the first of these is set to be 17 March 2021 - i.e. before the end May compliance deadline, we expect that as we move through the next 9 months, attention will focus increasingly on those and their progress - some 19 million tonnes is planned to be auctioned across the four auctions scheduled for 2021.
19 million is going to be a very significant weight in a compliance market that is only approximately 40 million tonnes, (or less due to the impacts of Covid-19) and even more if you adjust for the 8 million expected to be given / received from the EITE folks - leaving demand net of that of not more than perhaps 32 million, and again, on a Covid-unadjusted basis.
Still, the auctions are a while off, and there's understandably a new optimism on the sell side and if you don't ask you won't get.
So to reiterate - can we please encourage buyers and sellers to take a view, get on screen and contribute to price discovery so we can go from there.
Carbon Match - 1pm-5pm every weekday.
I whipped up a chart
so yeh Back in the black and nearly back to high point pre corona
Attachment 11659
Yes significant swing from the very bottom -1100K to 172K positive at week end
Net Recovery now fully offsets fees, write-offs, gross returns and net realised losses into positive territory for first times in weeks across the 3 months
Possibly more real recovery due in some areas in future, with rebalancing into Retail & Banking starting to bounce, & having realised some of the smaller riskier fish applying into more solid runners for next section of the ride up out the other side of the Covid-19 gully..
Been a crazy ride alright and really not what I was expecting. Was fortunate enough not to have anything in the market leading up to March and have been steadily climbing back in since, with the amount of invested capital injected in having doubled through April/May, so depending on how you look at it, somewhere between a 30-45% gain.
Despite that, I still feel a little disappointed I didn't hold onto positions that I traded out of which have subsequently raced higher, and that my Kiwisaver is still in a cash fund...what to do? As above, I wasn't expecting this kind of recovery, but if it looks like a V and smells like a V, then it's probably a big fat V.
I've got an internal battle going on right now, with my head still saying things are going to drift lower and it's going to be a tough couple of years or so. But how much longer before this rapid recovery runs out of puff? And what percentage of gains are we likely to still see in that time? And when it does stop, what's going to happen?
Despite the crazy rise, I don't think we'll see another crash, as too many people have just seen one and now have expectations about what's out the other side (another huge and swift recovery) and consequently massive applications of FOMO related cash...so that scenario seems unlikely.
So I'm thinking the more likely scenario post this current run is for the markets to still drift lower, or maybe just be flat for a lengthy period (x years) to allow for reality to catch up.
Given the above, I'm tending towards throwing the Kiwisaver at it to catch what's left of this run (it could be 20+% for all I know) and if we drift lower over the next couple of years, then am I likely to lose that 20%? Probably not, given the amount of gov/fed helicopter money and traditional depositor money looking for yield. If I have real concerns, then I guess I can put the KS back into a cash fund later. I need to remind myself of course that this KS is long term and I shouldn't get too caught up in the short term outlook...that short term thinking has already cost me dearly over the last couple of years. Onwards and upwards.