CPI COMES IN CUCUMBER COOL; BIG CAPS CRASH, THE SMALLS RALLY

If you think I’d be somewhat embarrassed showing my face around here after getting the CPI call wrong, you’d be kidding yourself. Half the time in this business you get things wrong, fumble around looking for reasons to love or hate something. But in the end, you should’ve just held $AAPL.

I won’t even touch on the CPI numbers since it’ll just be me spitting out sour grapes at you without offering any value. We accept this new reality of plunging inflation and now we look at the results. On days like this I like to compile lists of stocks that performed well since I can always revisit it in the future to have a gameplan if a similar scenario should ever arise.

First let’s start at the obvious: rates are dropping. The US 10yr is down 10bps to 4.18%. Who benefits from lower rates class? That’s right, fuckheads with a lot debt or people who want to take on a lot of debt. It also benefits supply chains and consumer facing companies because we know lower rates is conducive with great consumer activity.We might also look at companies saddled with large losses due to their treasury exposure, going from low rates to high and back to lower and also companies growing fast but burning through cash in order to finance operations.

What we want t ignore, for the sake of posterity, are stocks rallying today who will likely be bankrupt in a year or two anyway, such as $LCID or $BIG.

The interesting thing about today is 78% breadth is all of the cool stocks are lower: $AAPL, $MSFT, $NVDA, $AMZN, $META, $TSM all hammered lower from 2.5 to 5%. That’s because those stocks worked for years and now we are pricing in shit. Look at the $IWM, higher by 3.4%, a staggering gains when crossed against a loss of 3.1% for the $SMH and a NASDAQ down by nearly 2%.

But this rotation isn’t narrow, quite the contrary. We are hitting all of right areas of the market to bid up whilst punishing the overpriced FCF money makers. I view this change as a net positive, although jarring at the moment.

So what stocks are working?
Retail: $GPS $VSCO $URBN
Solar: $RUN $CSIQ $NOVA
Homebuilders: $DHI $PHM $HOV
Biotech: $ILMN $NTLA $TWST

Banks stocks, especially those with a lot of treasury losses, such as $SCHW.

Admittedly, I sort of blew this rally, as I sold my 12% $TNA position before the close due to fear. But I did manage 37bps return and now sit in 100% cash. My sense is hedge funds are really getting hammered today with the losses in tera cap stocks and the rotation into the areas mentioned above is too much too soon. Look at some of these gains.

Overall, this CPI number guarantees the Fed will cut rates, but that doesn’t necessarily mean everything is great. It’s just great today, at least for those who sold all of the stuff that was working for the past 3 years and loaded up with shit.