Monthly rollup | May 2025
- Jun 1
- 9 min read
Stocks Mentioned Riot Platforms (RIOT), Nvidia (NVDA), Twilio (TWLO), Interactive Brokers (IBKR), MicroStrategy (MSTR), Metaplanet, Cantor Equity (CEP), Bitcoin ETF (IBIT)
Highlights
May 01, 2025
For decades, the Japanese and Chinese produced more than they consumed and saved the difference.
A part of those savings got invested in US treasuries, which meant the US govt could spend more than it earned and borrow the difference.
The more Asian savings grew, the more US borrowing surged. Western economists understood this mechanism, but instead of thanking the Asians, they vilified them for saving money.
They called it "the savings glut".
As Asians grow older, they start dipping into their savings. They sell US assets at an accelerated pace because the dollar is in decline and the current administration says they are no longer welcome in the US market.
Western economists understand what's happening, but instead of rolling out the red carpet to stop the exodus, they vilify Asians yet again by saying they are taking advantage of US consumers.
China pegged its currency to the dollar in 1994 (a move applauded by Western economists) at the rate of 1 USD = 8.28 CNY. Today, the dollar buys 7.26 CNY, which means the yuan has appreciated 14% in the last 30 years.
And yet, Western economists and media personalities like Kyle Bass keep belittling the Chinese for devaluing the currency to boost exports.
A lie repeated often becomes conventional wisdom.
Now, the US govt faces massive budget deficits, a starkly divided Congress, interest payments going parabolic, and $9 trillion worth of debt in need of refinancing.
They are taxing their citizens with tariffs to try to plug the hole. Once again, instead of calling it what it is - a tax - they've somehow managed to convince the world that they are fighting a trade war and their trading partners are the enemy.
The War on Terror has morphed into the War on Trade.
"Negging" doesn't work on pretty women at the pub.
Negging doesn't work on global equities investors either.
There's a US based echo chamber (eg. milkshake bros) trying to spread the "strong dollar, long US assets" message. It is a classic magician's trick to mask the sleight of hand.
"Look, over there!"
Some propagandists go so far as to employ schoolyard bully tactics. "Chyna", not China.
But peel back all the layers of gaslighting and the truth stands out - the US government is deep in the hock to foreigners.
The foreigners have wised up to the dollar's "exorbitant privilege" and are selling US assets lock, stock and barrel before the currency blows.
As Kuppy says, we're witnessing a DM becoming an EM.
Allocate accordingly.
May 02, 2025
Bitcoin mining is a terrible business
Riot Platforms (RIOT) reported Q1 numbers yesterday and the numbers couldn't get worse.
Net loss of $296.4 million
EBITDA loss of $219.1 million
Revenue of $161.4 million (up 104% y-o-y)
For every dollar of revenue, the company lost a dollar and 84 cents. But look, revenue grew so much because they constructed new mines!
There's a joke in PE circles: lose money on every sale but make it up on volume.
Except in case of bitcoin mining, they can't make it up on volume without changing the source code to increase block rewards.
This is the doom loop. Miners are forever destined to lose money until they change the code - at which point they'll still be mining something with no intrinsic value.
Bitcoin and the miners are for gamblers and speculators, not rational investors seeking safety of principal and a satisfactory return.
May 04, 2025
Why are Asian currencies strengthening?
Because the dollar is toast.
Printing dollars, exchanging it for foreign made goods, then having those foreigners turn around and lend those dollars back to the US contributed to 45 years of American exceptionalism.
The reversal of this long-term trend will be ugly, and currencies are the first to reflect the shift.
Everyone's worried about Chinese devaluation, but the charts say the Honky dollar is about to de-peg and get stronger vs the dollar.
SGD strength also points to a Chinese recovery. Which makes sense. If the US benefited from capital inflows after beginning its grand QE infinity experiment in 2008, why can't China adopt the same Keynesian playbook and attract global capital?
The world's second largest economy hasn't seen a bull market in a decade. Simple mean reversion indicates one is overdue.
May 06, 2025
Hong Kong Dollar de-peg
China haters like Kyle Bass nailed the HKD de-peg trade... in reverse. Inflows are so strong, the HKMA is unable to intervene fast enough to prevent the currency from appreciating.
This is happening while other Asian currencies are also appreciating due to surging capital inflows.
Why are investors bidding up a pegged currency?
In 2011, when the eurozone was in crisis, the Swiss National Bank pegged the franc to the euro. They vowed to buy unlimited euros so that Swiss exports to the EU would remain competitive.
The result? The SNB had to take interest rates negative and load up their balance sheet with depreciating euros. It still wasn't enough. Weeks after publicly promising to defend the peg, they de-pegged with no warning and the franc appreciated over 20% within a day. Several FX brokers went under.
That wasn't the worst of it. It turned out, banks in Eastern Europe had convinced homeowners to denominate their mortgages in Swiss Francs.
Polish homeowners found themselves on the wrong end of a currency de-peg.
No way anyone could have connected the dots in advance.
The point is - when currency pegs break, the ripple effects extend far beyond the immediate repercussions.
In today's scenario, rather than scramble for dollars during a crisis, global investors with dollar exposure scramble out of dollars.
The result is an endless wave of dollar selling as dollar assets and liabilities are closed out and capital is brought home to the base currency.
Like Kyle Bass, the milkshake theory predicted this move... in reverse.
The dollar is weakening because investors are cashing out of dollar assets and taking their capital home. Investors are price insensitive in hitting the bid.
If your prime broker is Lehman Brothers and the only way you can wire out your funds is by liquidating everything, would you care about slippage? That's how Asian fx is acting - there is a mad rush to clear out of dollars before SHTF.
The immediate damage isn't as important. The Black Swan is the Asian equivalent of the Polish homeowner with the CHF mortgage.
Macro is back.
May 07, 2025
Seaport Research initiated coverage of Nvidia (NVDA) with a Sell rating.
That's the sell side equivalent of the new kid punching the biggest bully at the school yard.
The invincibility aura that has hitherto cloaked AI bubble stocks is disappearing.
May 08, 2025
Twilio
Twilio (TWLO) reported decent Q1 results - revenue up 12% yoy, active customer accounts up 7% to 335k.
I timed my exit perfectly earlier this year, locking in a 90% gain. It was a great 'top' call.
Since then, the stock has retraced to exactly where it should have found support, then bounced.
Those trading a longer-timeframe would have held. I prefer to rotate.
There are lots of styles that make money in the market. It took me many years to find and hone a style that worked for me.
If you subscribe to my newsletter and follow my thinking, I can help you find your own.
May 09, 2025
Sell the rip! Buy the dip in international equities
Shipbuilding
Shipowners prefer to build new vessels in Chinese shipyards. Trump wants to tax US port calls by Chinese made ships and penalise shipowners with a primarily Chinese fleet.
In addition to the tariffs, US consumers will now bear the higher costs of transportation.
May 10, 2025
Druckenmiller talks about playing the dotcom bust by being long bonds for this reason. Today, long bonds or dollars isn't an option.
The opt out trade today is long gold. Gold has a Sharpe ratio of >3 and has been immune to the volatility that's affecting most sectors.
May 13, 2025
Fed directly buying Treasuries at auction - QE or worse than QE?
FinTwit is divided on whether the Fed buying Treasuries at auction is QE. Let's examine it.
In typical QE, the Fed prints money digitally and buys assets from the market. On the assets column, the Fed counts the Treasuries and MBS it buys with freshly printed money. The liabilities column shows an increase in reserves.
The net effect is an increase in the size of the Fed balance sheet.
The seller of Treasuries gets a credit to his account at the bank. Bank deposits go up, and the commercial banking system uses the wonders of fractional reserve banking to further lever up their balance sheet.
Thus, typical Fed QE works its way through the commercial banking system to cause inflation.
What happens when the Fed buys Treasuries directly at auction?
The flow of funds changes. The Fed adds treasuries to its assets, and credits the funds to the Treasury General Account.
The commercial banking system is bypassed.
By not having to raise money from the market, the Treasury avoids "crowding out" private credit and keeps yields lower than they otherwise would have been.
The technical term for this is yield curve control.
Even Keynesians who support profligate government spending and money printing do not recommend direct monetization of the debt in this manner.
Why? Because bypassing the commercial banking system stalls credit growth. It also runs the risk of breaking the pricing mechanism in the bond market. There can be no market clearing price if the Fed simply keeps hoovering up the debt.
The BoJ represents a good example of the end game of such measures - it is the buyer of last resort for both the stock and the bond market.
The Fed buying Treasuries directly at auction is the first step towards going Japanese. If it continues down this path, it will forever break the pricing mechanism in the bond market.
It also risks revealing the naked truth of central banking, creating a crisis of confidence in the dollar.
That outcome is more dangerous than QE infinity.
May 14, 2025
Interactive Brokers (IBKR) comments on crypto trading on their platform:
"As far as what the crypto space means to us, we would obviously like it to grow. It's not growing as fast as we would like, which, to me, personally, is somewhat of a surprise because if you look at the cost of trading of crypto assets on our platform, it is significantly lower than the cost that our competitors charge, yet we do not see a huge influx of cryptocurrency traders to our platform.
So I would expect more. For now, we just have to be satisfied with rounding out our offering, giving our clients and financial advisers access to the crypto cash so that they can access this asset class for themselves and for their clients as well".
If you strip out the Ponzis like MicroStrategy (MSTR), Metaplanet, Cantor Equity (CEP) etc, crypto isn't growing. Retail had their fun blowing their life savings (or taking credit card debt) to buy memecoins and scamcoins. Institutions bought Bitcoin ETF (IBIT) due to peer pressure but passed on the Ethereum ETF.
There's nothing wrong with IBKR's offering; their inability to lure in traders is a sign of waning enthusiasm for crypto.
I got out of the game last November and haven't looked back.
May 15, 2025
I've taken down long exposure. A blistering rally heading into the summer, with no clarity on tariffs (a pause isn't policy), makes this a good point to take gains off the table.
Am I too early? Time will tell.
May 22, 2025
Trend Follower Paul Mulvaney is down 55%
I'm friends with a few trend following/ systems traders and respect their craft. But here's the thing - trend following is as prone to heavy drawdowns as a discretionary style.
Paul Mulvaney, who is at the top of his profession, had a 40% down month in April 2025. His peak-to-trough drawdown hit 55%.
You can control risk, control volatility, run statistical analysis till the cows come home, and still get punched in the face by the market.
Here's where it gets interesting. After a drawdown like this, a trend follower will simply continue to run their system and risk making the drawdown bigger.
Most discretionary traders would do a hard reset and cool off. Some won't ever return to the game.
The real advantage of trend following isn't in the backtests or the risk management. It is the ability to keep playing and not get fazed by drawdowns.
A lesson that discretionary traders will do well to incorporate.
(Picture below is Dunn - another trend following beast with a long-term track record of outperformance. Note the significant drawdowns of 52% and 63% in between).
May 25, 2025
Gold
If you buy the dip in uptrends, the consolidations in uptrends, and the peaks in uptrends, you end up in a lot of uptrends.
Do the same in downtrends, all you do is lose money and make yourself miserable.
While this is good trading advice, it is hard to find such clear uptrends. Gold being in one is a sign in itself, a signal that something is wrong with the financial system and gold has sniffed it out.
May 29, 2025
Japanese retirees have made peace with inflation and declining living standards? Let's hit 'em where it hurts!
Japan used to pay farmers to not plant rice crops, because low rice prices (high supply) were seen as a dent to national prestige.
If the fall of the USSR exposed the folly of communism, the decline of Japan exposes the folly of the anti-capitalist mentality.
May 31, 2025
In the lead up to the Great Depression, investment trusts had a higher market cap (AUM) than the entire universe of public listed companies.
Investment trusts were formed for the sole purpose of holding shares in other investment trusts.
At least investment trusts were actively managed entities, unlike the current fad of "passive investing".
Warren Buffet's famous 2008 bet nailed this long-term trend. Passive outperformed active, in aggregate, because capital flows made it so.
Will robo-advisors and AI accelerate the dominance of passive over active, or will discretion, judgement and stock picking make a comeback?
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Good Trading!
Kashyap
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