Wandering Stock
The Blind Squirrel's (delayed) Monday Morning Notes, 17th April 2024.
Back on the grid after a week in the Outback. Glad I did not miss anything! But do not miss the 🐿️’s Top Gear moment…
Welcome! I'm Rupert Mitchell aka The Blind Squirrel and this is my weekly newsletter on markets and investment ideas. If you've received it, then you either subscribed or someone forwarded it to you (add yourself to the list via the button below). Please also consider becoming a paid subscriber or gifting to a friend!
Wandering Stock
Quick update. Team 🐿️ got back last night from a week ‘off the grid’ in the central Australian outback. A trip to the ‘Big Red Centre’ has been high on my bucket list since moving to the ‘Lucky Country’ (and before). It did not disappoint.
It turns out that we also picked an ‘interesting’ week to miss out on live markets. Like the jackaroo’s cattle, stocks were wandering well away from the strong trend lines that have been in place for the past 6 months.
It turns out that the ticks up in implied correlation, equity vol VIX and treasury vol (MOVE) that we eyeballed before our departure were indeed the start of something bigger.
Our SPY 0.00%↑ straddle hedge against a breakdown in the (crowded) dispersion trade and our long bond ‘fire insurance’ both did their job admirably while we were away.
Long bonds did not take kindly to the hot US inflation and retail sales data that printed while Team 🐿️ was ‘on the road’. Yesterday’s messaging from Jerome Powell on the pace of interest rate easing does not feel like a surprise.
We obviously did not emerge completely unscathed from the week. It turns out that ‘deep value’ plays on AI become even better value when some of the fizz comes out of the headline narrative. With Nvidia starting to lose momentum, we have been stopped out of our play on coherent optics. We have also been moved to the sidelines on our Brazil basket (a price, not an Elon Musk related move).
On the positive side, leaning into the strong momentum in gold has worked very well so far. We have been a skeptic of ‘yella fella’ derivatives (silver, precious metals miners etc.). Nevertheless, our one ‘alternative’ precious metal play (‘D2C’ bars and coins) A-Mark Precious Metals AMRK 0.00%↑ did get a very helpful
-shaped kick ‘in the behind’.
Just a quick note this week. Normal service (plus podcasts) will resume next week. The trip to Australia’s ‘Red Center’ had catalyzed a number of longer-term thoughts that I want to build on in next Monday’s (yes - back to schedule!) letter. This is going to be called ‘The Great Rain Robbery’.
In Section 2 this week (for paid subs) we will look at some risk management strategies around our bond and volatility hedges and core portfolio positions.