Stocks Mentioned Nvidia (NVDA), Glencore (GLEN.L), Canadian Natural Resources (CNQ), Cisco (CSCO), Silly-con Valley Bank (SIVB), Antero (AR), Cheniere (LNG), NextDecade (NEXT), Wheat (ZW), Wynn Resorts (WYNN), Cameco (CCJ, CCO.TO), BlackRock (BLK), Morgan Stanley (MS), Skeena Resources (SKE), Royal Gold (RGLD), Weyerhaeuser (WY), Phillips 66 (PSX), Westshore Terminals Investment (WTE.TO), Franco-Nevada (FNV), EuroDry (EDRY), Borr Drilling (BORR), JD[dot]com (JD), Tsakos Energy Navigation (TEN), NorAm Drilling (NORAM.OL), Mercer International (MERC), Kenorland Minerals (KLD.TO), Nutrien (NTR), Patterson-UTI Energy (PTEN), Transocean (RIG), Africa Oil (AOI.TO), New Fortress Energy (NFE), Super Micro Computer (SMCI), NVIDIA Yield Shares Purpose ETF (YNVD), Matador’s (MTDR), Woodside (WDS), NextDecade (NEXT), Sempra (SRE), Yieldmax MSTR Option Income Strategy ETF (MSTY), Equinox Gold (EQX, EQX.TO)
Highlights
October 03, 2024
Nvidia
Nvidia (NVDA) is fascinating from a TA perspective. Let me preface by admitting I'm not a chartist, but 3 things stand out on the daily chart:
the enormous wedge pattern
the fan principle
the 50/100 DMA crossover
The wedge is closely watched by the entire trading community. There will be a big move when it resolves - right around next quarter earnings.
According to the fan principle, a move above $126 should trigger a new uptrend.
Then we have the MA crossover. Except for a brief window last November, Nvidia's 50 DMA has held above the 100 DMA through this entire bull run. That's changing.
[Second chart] On-balance volume is ridiculously elevated, but the CCI and RSI show declining momentum. Even vs. the QQQ, Nvidia has peaked in terms of relative strength.
How do you trade this? As a pure chartist, the answer is pretty simple - you don't. You wait for a move. One, because you don't want to get caught in endless sideways drift. Two, because the chart is setting up for a major move higher or a false breakout, either of which will provide an amazing entry.
Is Israel too involved in American politics?
Pictured below is Marc Rich, founder of commodity trading house Glencore (GLEN.L). Marc Rich was a Jewish American billionaire who became (in)famous for moving to Switzerland to escape indictment in US courts.
After being on the FBI most wanted list for 17 years, he was pardoned by President Bill Clinton. It was one of Clinton's last acts before leaving office.
In the book The King of Oil, Rich openly credits Mossad and several Israeli cabinet members for influencing the US President on his behalf.
Scholars have called it the most controversial use of the presidential pardon.
For the last two weeks, everyday Americans are concerned about the impact of Hurricane Helene, while US senators are concerned about bombing Iran.
The United States of America is behaving like a vassal state rather than a global superpower.
October 06, 2024
First cocoa, now coffee
There's always a bull market somewhere.
Trading Anecdote
"Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong - not taking the loss - that is what does the damage to the pocketbook and to the soul." - Reminiscences of a Stock Operator
I have a 53% win rate in my futures account. And yet, that has been the best performer among all my accounts YTD. The secret is using stop losses and letting winners run.
Really, really simple to grasp intellectually. Really, really hard to do unless you blow up at least once.
October 07, 2024
Canadian Natural Resources
Canadian Natural Resources (CNQ) is raising $4 billion in debt to acquire Chevron's (CVX) 20% interest in the Athabasca oil sands project and 70% interest in the Duvernay shale in Alberta.
The $6.5 billion all-cash deal adds 122,500 barrels of oil equivalent production per day.
As a sweetener for tacking on so much debt, CNQ felt the need to emphasize a 7% dividend increase and de-emphasize the high indebtedness (D/E >1) post-closing.
(no position)
Nvidia fan principle uptrend
And then there was one. NVDA looks set to confirm a fan principle uptrend - if it manages to close at this level.
Gasoline
Gasoline indicates we're back in a stagflationary environment.
Rising bond yields indicate a weaker dollar ahead.
The wild moves in several markets indicate there's a hot ball of liquidity sloshing around trying to find a new home.
This is the best trading environment a macro trader could ask for.
Coreweave
Nvidia (NVDA) SPE CoreWeave is worth $23 billion based on this Cisco (CSCO) funding round.
Wait, really?
"CoreWeave had discussed a secondary transaction that would allow existing shareholders to sell up to $500 million worth of shares, Bloomberg News reported in September".
Here's how this works. Say Cisco is planning to invest $600 mn. The company will invest a token sum, let's say $100 mn, at the $23 billion valuation, infusing cash into CW. The remaining $500 mn will be used to buy shares from current shareholders at a far lower valuation, say $10 billion.
Silicon Valley start-up employees used to be able to pledge their shares and take out loans from Silly-con Valley Bank (SIVB). The failure of that storied (not!) bank means the AI bubble cos need to get creative about generating exit liquidity.
An IPO is impossible since that would reveal everything. Such secondary transactions are the only way out.
At least this time the bag holder is another tech company and not Fidelity wealth management clients.
Bitcoin
Bitcoin is forming a gravestone doji candle and the bitcoin bugs are rejoicing. It's one thing to fade the price action on a trade, quite another to become euphoric over a small up move.
October 08, 2024
Natural Gas demand drivers
Add in additional data center demand - 'cos AI - and you have a long-term uptrend in domestic nat gas demand. If Belgium is successful in sanctioning Russian gas, you also have growing demand for US LNG (at least until Argentina takes off).
This is a story no one is quite talking about, but I'm getting very interested in Antero (AR) Cheniere (LNG) and NextDecade (NEXT)
Oil stocks nose dive again
Oil is down, tech is up. All is right in the algo trading world again.
Baker Hughes
"The 10 ICL units – five for gas storage and five for dual-use injection boosting or gas export to the existing gas distribution system – will be installed at the Margham Gas storage facility in Dubai, significantly increasing its capacity".
Wheat
The Black Sea grain initiative is dead. Time to get long wheat (ZW), which is still trading at 2020 levels. Cocoa, coffee, and orange juice have already led the softs higher. Sugar, wheat and corn are playing catch up.
October 09, 2024
Wynn Casino UAE
Wynn Resorts (WYNN) shared its deck from the exclusive investor meeting on its UAE development project yesterday, breaking a long period of silence.
The integrated casino and resort features 1542 hotel rooms, 225k sqft of gaming space, and 130k sqft of luxury retail. All set on an artificial island in Ras Al Khaimah, which is fast becoming a tourist destination.
(I'm a WYNN shareholder)
Cameco
Cameco (CCJ, CCO.TO) Q2 call cites "unexpected significant tax increase in Kazakhstan" as a bullish factor.
Cameco has been in Kazakhstan since 2008. A few years ago, they were forced to sell down their equity interest in Inkai and purchase those pounds at the spot price. Soon after, the Russia-Ukraine war made it impossible to get those pounds safely out of Kazakhstan.
Then the govt announced production cuts to support the spot uranium price... and made up the revenue shortfall by hiking royalties and taxes.
But sure, this was all "unexpected". Cameco had no way of knowing which way the political winds were blowing in a country where they had partnered with the govt for 16 years.
In a few years, they'll be surprised to report unexpected net losses, because the CFO cannot foresee that their policy of buying high at spot and selling lower at term is a money loser.
When uranium hits $140 next year, Cameco will receive $65 for each pound they sell. Not to worry though, they will get a cool $72/lb in 2026! And rest assured, management will keep signing long-term deals giving away more than they currently produce at 50-60% discounts. After all, buy high, sell low, and hope to make it up on volume is a legitimate business strategy.
Harvard Business School should do a case study on Cameco, so future managers can study how not to run a business. I must have analyzed about 700-800 companies in my 8+ years in finance and I've never seen such willful incompetence.
Wheat
Repeated heavy rain led to the smallest French wheat harvest since the 1980s this year. The plunge in volume, coupled with mixed milling quality, is set to slash exports from the European Union's biggest wheat-producing country.
October 12, 2024
BofA private clients have started to embrace duration risk now that the Fed has cut rates by 50 bps and indicated further rate cuts are coming.
Yet strangely enough, we are seeing yields spike while the dollar rips higher.
Higher yields and a weaker dollar makes sense. That's the return of inflation trade.
Lower yields and a stronger dollar makes sense. That's the market pricing in 2.5% Fed Funds and continued capital inflows into the US.
Rising yields and a rising dollar, with equities at all-time highs and gold ripping without a discernible correction?
Everything points to an impending 3-alarm fire. In which corner of the market? We'll know when the smoke starts billowing out.
Gun to my head, I'd guess equities.
Even with all the vol selling we've seen in the past 2 years, the VIX is now above 20. The near-term Vix, far-term Vix and vol of vol are all elevated, yet the put/call ratio shows no signs of panic.
I think that panic is about to manifest.
“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” - Chuck Prince, July 2007.
October 14, 2024
BlackRock and PE AUM
BlackRock (BLK) has $11.47 trillion in assets under management, after adding $2.37 trillion in the past year. To get a sense of how big this is, the Fed's balance sheet is $7.05 trillion while India's stock market cap is $5.5 trillion.
The Fed printed $3 trillion in response to covid. BlackRock added $5 trillion in AUM since covid. Ah, the wonders of the printing press.
"Permit me to issue and control the money of a nation, and I care not who makes its laws!" - anon banker
Wheat (again)
More bad news on the wheat front. Meanwhile, hedge funds are net short wheat ZW futures.
Bonds and Stagflation
The bond vigilantes are back in the saddle as the US stretches itself thin funding yet another war. The only thing holding up the dollar is the current melt-up in US equities, which continues to suck in global capital flows. But with US equities accounting for half the global stock market cap, this bubble is approaching its upper limit.
Being able to take the long view, to ignore Barron's call for SPX 6000 and focus on buying stuff the world actually needs, is a competitive advantage right now.
I have never been more long a broad variety of commodity-based industries.
October 15, 2024
ASML quarterly net bookings down from EUR 5.6 billion in Q2 to EUR 2.6 billion in Q3, a further 53% drop qoq. When you tell your customers you can blow up their centi-million dollar equipment remotely, it turns out they don't want to give you billions of dollars for the privilege.
The semiconductor bubble has popped. No amount of gamma squeezes and hype from NVDA will reflate this.
The SMCI 10-K is being delayed so those in the know will get a chance to exit before SHTF.
When the time comes to short this bubble, you won't want to. It feels good to be long the bubble stocks, short the commodities, short some puts for good measure, and make money every day. That's why it has become such a crowded trade.
The unwind will be equally nasty. At least until the Fed steps in and bails out the next hedge fund which goes bust, like they did with LTCM. Or the Treasury steps in and bails out the derivatives traders, like they did with AIG FP. This is all coming.
When, not if.
Morgan Stanley - Technical Analysis
That's a nice looking rejection candle on Morgan Stanley (MS).
October 16, 2024
Nassim Taleb once said he'd never own banks because that's a short gamma trade. This was pre-2008 when financials had a huge weighting in the S&P 500 and everyone owned the banks for the dividends.
With the indices now magnificently concentrated, owning the popular stocks is also a short gamma trade. The sell-offs are violent because there's no liquidity on the way down.
This is a feature of crowded trades. The macro environment sent plenty of warning signs.
Top 10 capital raises by Aussie listed juniors in Q2
My top 15 longs
Newsletter subscribers got treated to a doozy of an update yesterday, covering my top 15 long positions.
Everyone talks about letting winners run. I actually practice it. My no.1 position - Skeena Resources - is up 111.4% and accounts for 10.77% of NAV. I haven't sold a single share on the run up in this huge winner.
The update covers a range of stocks across sectors. At $150/month, trying it out is a no-brainer.
Stocks covered in yesterday's update:
Skeena Resources SKE (BC gold explorer)
Royal Gold RGLD (gold royalty)
Weyerhaeuser WY (timber REIT)
Phillips 66 PSX (refining and downstream)
Westshore Terminals Investment WTE.TO (coal loading terminal with a soon to be launched new line of business)
Franco-Nevada FNV (gold royalty with a valuable, overlooked asset)
EuroDry EDRY (special situation)
Borr Drilling BORR (shallow water offshore oil services, the unsexy cousin of VAL and RIG)
JD[dot]com JD (China)
Tsakos Energy Navigation TEN (tankers)
NorAm Drilling NORAM.OL (oil services Permian pure play)
Mercer International MERC (technical trade on a pulp and wood products company)
Kenorland Minerals KLD.TO (prospect generator/ gold royalty)
Nutrien NTR (fertilizers)
Patterson-UTI Energy PTEN (US onshore oil services)
Crude Oil
A headline like this is written for one reason only: to induce more algo-driven selling of oil futures.
Fundamentals and macro support higher oil prices. The technicals say lower. In this case, the record HF short position has painted the tape, so I'll pick the fundamentals and macro over TA.
I'm long the Nov, Dec and Feb contracts, plus heating oil and gasoline for good measure.
October 17, 2024
Bullish on bitcoin
The bitcoin price was $63.2k when I wrote the article Bitcoin: Seasonality & Trading Strategy in March. I was very public about my exit. Fast forward 7 months and the price is up 6.5% after a long, choppy period where pivoting to gold was the right move (I called that too).
Bitcoin finally looks interesting for a long again. It may be fool's good or digital quicksilver, its best days may be behind it, its design is severely flawed and better cryptos are making it obsolete, but that's a fundamental view and not a trading view.
However, my participation in any uptrend will be more limited than the previous cycle. Other commodities are relatively so cheap, it doesn't make sense to allocate too much here.
(How I draw trendlines - I draw it to make sense of the data, not to be a purist CMT who doesn't trade)
Parallels between Nvidia and Cisco
Transocean
Transocean (RIG) has contracted out the 2016 Deepwater Conqueror for a dayrate >$500k in the GoM. The catch? Contract starts a year out.
Ho-hum. Just another sign that recovery is going to take a looong time.
October 19, 2024
Shell got stuck in Nigeria. I'm glad I exited Africa Oil (AOI.TO) before the further 26% decline from June to now.
October 20, 2024
Has the dollar peaked for the rest of the decade? I think so. I don't drink milkshakes.
October 21, 2024
Serbia 'hopes to join the EU' but is closer aligned to Russia. In return, they get cheap gas.
The same cheap gas Belgium wants to outlaw for all of EU.
The same cheap gas the US blew up Nord Stream 2 for, to ensure the EU is kept reliant on expensive US LNG as opposed to cheap energy.
The same cheap gas, plus Inflation Reduction Act incentives, that will lead to re-shoring of manufacturing to the US.
Pay attention here. In a pinch, will Serbia prefer to join the EU and self-immolate, or industrialize its economy?
Nat gas is so cheap no one is asking this question now. But it is a question traders of every other mineral are always thinking about.
New Fortress Energy
If New Fortress Energy (NFE) splits into two, I'd be very interested in the FLNG business. The downstream 'cash flow' business is at the mercy of FEMA. The infrastructure business has promise.
October 22, 2024
Super Micro Computer (SMCI) is up 9.2% after failing to file its Form 10-K. This is a company the SEC previously busted for accounting fraud, and they are back at it a second time.
In 2020, stocks of companies that had filed for bankruptcy protection kept leaping higher because the Fed was printing money like there was no tomorrow.
The Fed isn't printing now. Nor is there liquidity coming in from RRPs. So, what's driving this AI insanity? Just idiots and algos who can't parse a financial statement.
October 23, 2024
Purpose Investments ($20 bn AUM asset manager) announced today that it has changed the risk rating for NVIDIA Yield Shares Purpose ETF (YNVD) from “medium-to-high” to “high”.
High risk? This strategy should be rightly labelled "degenerate gamblers only". With 2x levered ETFs, at least you know what you're getting. This is a 1.25x levered ETF on NVDA masquerading as a yield play.
I'll take a Chinese wealth management product over this ETF.
Matador Resources
"Matador’s (MTDR) executive officers and directors have purchased approximately $1,400,000 of Matador stock over just the last twelve months, and since the beginning of 2021, Matador’s executive officers have made 27 separate open market purchases totaling 50,000 shares of Matador stock for approximately $2,000,000.
During that time... Matador’s executive officers have yet to sell a single share".
During that period, the company has also kept dilution to a minimum, with s/o growing from 116.8 mn to 124.8 mn while production has grown from 83,200 boepd to 171,480 boepd.
As a novice oil investor seduced by PV-10 values, I lost a good bit of money on Contango Oil & Gas and QEP Resources last decade, which made me swear off anything shale. But MTDR now has my attention.
Long New Fortress Energy
Would you buy this stock?
I did, and I explained the risk/reward on the trade in today's report to paid subscribers. NFE is now a top 10 position.
Incidentally, this comes close to being my favorite technical setup.
October 24, 2024
October 25, 2024
Jared Dillian (@dailydirtnap) says: "high fees, such as front-end loads, and commissions, are actually good for investors. If you put $100,000 in a mutual fund with a 3% front-end load, you are paying $3,000 in fees, and if you pay $3,000 in fees, the only way this makes sense is if you amortize the fees over a long period. Also, the high fees keep people from actively trading their funds or, more to the point, panicking out of them in times of stress because they’d have to pay another 3% fee on the way back in".
So Jared thinks actively trading is bad, paying high fees to toll takers is good, and making it hard to reverse poor decisions is good for the average Joe.
I'd understand this line of thinking if Jared were a communist or a bureaucrat trying to run other people's lives. But the guy runs a daily newsletter on trading and advises people on personal finance.
October 26, 2024
Permian oil production is getting gassier, indicating oilfields are maturing. US nat gas production is starting to decline.
Oil consumption continues to rise, while LNG exports continue to support Henry Hub prices.
Is the era of cheap and abundant energy finally coming to an end? This trend has been 10 years in the making, starting from the second half of 2014 when Saudi Arabia declared war on US shale.
I haven't heard oil executives toss in the phrase 'decline rate' in a long, long time. When investors start to worry about it, you can bet the secular trend has turned.
October 27, 2024
India has an IPO bubble, with 270 companies raising $12.57 billion YTD, as compared to $7.4 billion in 2023.
We know how this story ends.
October 28, 2024
Stagflation
Gold and copper bottomed in October 2023.
Natural gas bottomed in Feb.
Lumber bottomed in July.
Softs (mostly) bottomed in August.
Crude oil bottomed in September.
It may not seem like it, but we're in the early stages of the next inflationary cycle. Today's sell-off in hard assets is a gift for investors who have yet to rotate out of tech and into commodities.
October 30, 2024
If approximately 12% of coal fired power generation was converted to LNG today, it would double the current global LNG market.
The long-term bull case for LNG writes itself. Woodside (WDS), NextDecade (NEXT), Sempra (SRE)
MicroStrategy ETFs
Yieldmax MSTR Option Income Strategy ETF (MSTY) has amassed $557 million in assets, which is 1% of MicroStrategy's MSTR market cap.
Leveraged long ETFs on MSTR - MSTX and MSTU - have amassed $680 million in assets.
ETFs which derive their value from a stock, which derives its value from bitcoin, now account for over a billion dollars.
No surprise Las Vegas is seeing declining revenue. The gamblers have moved over to the capital markets.
1990 Japan. 2015 China. 2025 USA. Bubbles always pop.
Ernst & Young and Audit Failures
A couple of friends go on a hike and come across a mountain lion. One guy stops to tie his shoelaces.
"You really think you can outrun a lion?"
"No, but I only need to outrun you, not the lion."
E&Y is cutting ties with accounting frauds like SMCI to improve their public image. They will always have WireCard, but at least that was Germany and nobody remembers it now.
PwC has been auditing NVDA since 2004 and had no qualms about signing off on their 10-K.
Reflections on my SMCI shorting experience -Kashyap Sriram
The Next XIV
October 31, 2024
Equinox Gold
After massively overpaying Orion for its 40% stake, Equinox Gold (EQX, EQX.TO) lowered the high end of Greenstone guidance from 205k gold ounces to 130k ounces.
Share price on April 17: $5.88
Price yesterday: $5.80
In the same period, gold went up 18%.
Due diligence beats passive investing when it comes to mining stocks.
Nvidia and SMCI
NVDA Q3 for fiscal year 2025 ended on October 27th. The SMCI news came to light 3 days later and is therefore considered a subsequent event.
SMCI is Nvidia's third biggest customer and likely accounts for a chunk of Nvidia's accounts receivable. Will this risk be ignored or covered in the quarterly filing?
I was 11 years old when the dot com bubble burst. I'm enjoying this real-time thriller.
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Good Trading!
Kashyap