Monthly rollup | May 2023
Stocks Mentioned: NVidia (NVDA), Super Micro Computer Inc (SMCI), Cameco (CCJ), Sprott Uranium (URNM), General Mills (GIS), Stratasys (SSYS), Desktop Metals (DM), Nano Dimension (NNDM), Quant (QNT)
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May 01 2023
Capital controls tend to drive up domestic asset prices, but that's no comfort for those whose life savings is now trapped in a currency that's worthless outside the country. I saw this firsthand when I visited Sri Lanka last year. I opened a brokerage account there but couldn't find any cheap stocks to buy. It's the same case in India, where nothing is cheap because the market is pricing in anticipated capital controls and currency devaluation.
Raoul Pal often talks about how London rose in prominence as a direct consequence of US capital controls in the 1970s. Dubai is rising in prominence today as a direct consequence of Russian and Indian capital controls. History doesn't repeat, but it often rhymes.
May 02 2023
May 03 2023
May 04 2023
A wild spread between 10Y and 2Y treasuries has long been considered an accurate recession indicator. Note that there's always a lag. We're now at the most extreme reading in over 40 years.
May 07 2023
May 10 2023
Canada's Alberta province has been in a state of emergency since Saturday as wildfires are running rampant, prompting oil firms to shut in at least 320,000 of boe/day of production, about 3% of the country’s total output.
US gasoline demand has trended some 100,000 b/d above year-ago levels and is expected to average 9.1 million b/d over the summer, though still 6% lower than the pre-pandemic norm.
Two Republicans on Monday asked a congressional watchdog to assess the Biden administration's management of the Strategic Petroleum Reserve and audit its modernization program, saying sales from the SPR have undermined U.S. energy security.
Oil going higher is a when, not an IF question. Just a matter of waiting.
Looking at the broad indices alone, while it may seem like a relief rally is in progress, that's really not the case. This is just another day where money flows out of most sectors and concentrates on the mega caps. That's not bull market behavior but a sign of momentum extreme presaging a long-term top.
May 11 2023
May 15 2023
This is going to end badly for Megacap tech. And we're probably days away from peak mania if not there already.
May 17 2023
May 20 2023
May 25 2023
The one chart to rule them all. NVidia (NVDA) reported lower revenues in Q1 but used the word AI 225 times in the earnings call and got rewarded with a billion dollars in market cap per mention. All in 15 mins after the close, a brazen attempt to manipulate shares.
The analysts who should know better are raising estimates into this frenzy. Today's going to be a fun day.
SMCI was delisted for fraudulent accounting and is now a beneficiary of the AI fraud.
May 26 2023
First the Russell 2000, now the entire UK stock market. Manias like this don't end with a long sideways consolidation but with a series of sharp moves lower.
May 27 2023
May 29 2023
Non-commercials, i.e. speculators, have their lowest net long position in crude oil futures in over a decade. Even below 2020 levels when oil prices briefly went negative. This is after Saudi Arabia warned that oil shorts will face an "ouchie" moment.
This positioning is at the beginning of US summer driving season, with OPEC production cuts kicking in from May 1.
Spot uranium peaked at $58.2/lb in March last year. While uranium equities, as measured by URNM, are down 27.5% since then, spot uranium now is at $54/lb and looks to be quietly headed higher. Uranium equities tend to underperform the yellow metal in the long run as these are unprofitable companies staying alive by issuing shares in good times and bad. However, they should start catching a bid once the stealth bull market in uranium gets recognized. Cover the Cameco (CCJ) short on Tuesday.
URNM daily chart.
General Mills (GIS) had a smooth uptrend since my buy recommendation on 24th March but has now broken down and is flashing Sell. We've collected a 54 cent dividend and are at just about breakeven on the trade. Sell GIS on Tuesday at the open.
Sell 3D printing company Stratasys (SSYS)
We bought this stock in anticipation of an M&A deal. Instead, Stratasys management has pig headedly refused to unlock shareholder value, preferring to drive the company's value into the ground rather than let shareholders sell out for $18/share all-cash.
Stratasys is acquiring Desktop Metals (DM) in an all-stock deal, which will see SSYS shareholders owning 59% of the combined entity. The company has extended its "Shareholder Rights Plan", which is the euphemistic term for poison pill.
Situations like this are unpredictable. The current dip could well be a buying opportunity, if Nano Dimension (NNDM) manages to exert influence over the Board and forces this into a shareholder vote. After all, shareholders would rather take the money and run than hold on and hope. The last time Stratasys traded above $18 was during the peak of the Nasdaq bear market rally in August 2022.
However, I'm in the process of winding down open trades. So rather than spend time on due diligence on this transaction, I'm closing the position and moving on.
As you all know, I've been in semi-hibernation since March. I spent the first two months of the year laying the groundwork for incorporating a trading business in India, providing an avenue for my Indian clients to directly participate in my trades in international markets and crypto. However, the newly introduced 20% foreign currency tax and the business-killing crypto regulations (1% transaction tax, 30% profit tax on individual trades with no offset for losing trades) makes it unviable to operate a trading firm in this jurisdiction.
I have acquired UAE residency and I'm going to be moving to Dubai in a few months. That's all I can reveal for now. Stay tuned for more updates, or DM me if you'd like to consult with me on how you can protect yourself from India's capital controls.
Meanwhile, I'm positioned long energy and short tech, with a heavy bias towards short tech. I won't be giving out specific buy/sell recommendations since I don't expect to be active every day in the markets and won't have the time to post follow-up updates.
May 30 2023
Quant (QNT) is a 1% long-term position for me. However, I see the breakout here and I'm adding a trading long as well. This could double before it loses momentum, based on my prior experience with this token. Stop at recent lows of $96.5 for an excellent risk/reward.
Note that I don't promise to follow up, although I will try. If you follow me on this trade, set your own stop and take profit triggers.
"Some China bulls are retreating in frustration, trimming portfolio allocations as they come to terms with a lackluster economic recovery and modest earnings".
The same headlines could have been written about the US, if the fall was in the S&P. When the market rises, the headline will say it's on recovery hopes. When it falls, it is due to frustration. Don't be fooled by the halo effect which drives these headlines.
May 31 2023
The algos have quite literally gone nuts. Maybe AI is self-aware and hates the coders who are trying to use this beautiful creation to make sordid money. For all the ruckus the quant funds have caused this month, I sure hope a few of them blow up and take their "generative AI" out of the financial markets.
I've seen crypto bubbles and even have vague memories of the dotcom bubble when Infosys went up every day and was being talked about by the cool kids at school. But those times pale in comparison to this given the market caps involved.
The latest Job Opening and Labor Turnover Survey, or JOLTs report, released Wednesday revealed 10.1 million job openings at the end of April, an increase from the 9.8 million in job openings reported March. Economists surveyed by Bloomberg had expected 9.4 million openings in April.
Strong labor market and a bubble in the Nasdaq. Sure doesn't give the Fed any grounds to stop hiking rates.