Rate Cuts for Christmas?
+ a BTBT stock update
PCE was a very market friendly 0.08 core month to month gain in May 2024. Yet, the bond market sold off hard with the 30 year bond rising 13 bps. What gives? My take is a bit of a “Trump win” is perceived as deficit unfriendly, but more likely the month and quarter end rebalancing served up the opposite reaction in what has been a market of late which is all about “pain” and “surprise moves”. After all, the $200 billion dollar market cap moves in Nvidia (25 billion shares outstanding) combined with sudden upward thrusts in perceived weaker areas such as software stocks or retail names wreaks havoc on market neutral pod strategies. CRM rallied 7% this week and isn’t far off from the pre quarter disappointment levels. META has stormed from $410 EPS disappointment levels to $510. The market memory is short and most moves are about who is in the most pain. PANW acts like they never shocked the market is gosh-awful billings and a clear strategy shift.
The market and all of us collectively create narratives to explain the action. Period. This gives us inner confidence to stick with trades or investments, UNTIL they hurt. “I can’t take it anymore” long or short creates bottoms and tops. Remember BABA and the Tepper long trade? He is super smart and owns this so everyone piled in for a few days and ran the stock to $88 before collapsing to $72 as of Friday without a real change to the story. It’s cheap, 5-6x FCF and that doesn’t include their investments, if ever monetized. They are buying stock stock hand over first and issued a $1.50 plus dividend for 2024. Nobody cares! I, myself, bought in to upper $70s a starter position and keep selling meager weekly calls to lower my cost basis. No more! Now I sit in this one til it shows itself that I should get bigger. The August HK listing isn’t far off. I didn’t get big enough to give up. Sizing your probes is key, as I always say. Remember the 6-7 cuts in 2024 narrative? Now we are at one, maybe two. I thought I would address this expectation today.