Read on the Trading Floor - 16 Feb 2024
Today’s focus… Vigilant CB's when everyone is on holidays, Rishi's by-election hammering, Nvidia, week ahead previews and much more
Macro Themes At Play
Theme 1 - How does technology rewire the intricate circuitry of the teenage mind?
Theme 2 - Grateful but Vigilant
Theme 3 - NVIDIA up 50% YTD
Theme 4 - Where does Rishi go from here?
Theme 5 - The week ahead previews
Further reading and listening of note
Theme 1 - How does technology rewire the intricate circuitry of the teenage mind?
This an excellent and must-read piece from 13D with intro/forwards from Brent Donnelly and Ben Hunt...
Rabbit Hole #11: Technology and the Teenage Mind
Having grown up playing computer games ... Super Mario, Golden Eye, Age of Empire, GTA etc etc... The gaming industry came under consistent political pressure due to the violent content that these games brought into households. However, history/time has proven that those games have delivered a fraction of the impact on society that smart phones have for teenagers and adults, but yet there's no 18+ "rating" for smart phone apps like there can be on movies and games. Similar with ads .. why are "free" games and YouTube allowed to have different ad standards than traditional TV? Does society / governments need to rate the products on our phone? Why is new technology treated different to old?
Theme 2 - Grateful but Vigilant
There has been little data this week to entice traders away from their half term or Lunar NY holidays but it's clear from the wave of CB speak (do they not go on holidays?) that their confidence has not grown in their fight to tame inflation.... “Victory is not clearly at hand”
They're open to cuts, but the risks of going too early are apparent to Orr, Bostic, Schnabel, Villeroy and others. Today's hotter PPI on the back of Tuesday's CPI miss has once again reminded us that domestic price pressures have not eased. Despite their numerous appearances, markets will continue to re-assess the incoming data to "price" how many cuts are appearing this side of Easter. Is there a reason for them all to speak, repeat the same message? Where's the value in over communicating?
Bloomberg - US Producer Prices Increased by More Than Forecast in January
Bloomberg - Orr Says RBNZ Still Needs to Anchor Inflation Expectations
FT - Productivity boost needed to keep inflation low, says ECB policymaker
Econostream - ECB’s Villeroy: Risk of Waiting Too Long to Cut at Least as Big as Risk of Cutting Too Soon
Federal Reserve Bank of Atlanta - Grateful but Vigilant: New Perspectives for a New Policy Environment
Theme 3 - NVIDIA up 50% YTD
I know I'm a cynic, I'm more than happy to hold my hand up and admit that but what is the EV of owning Nvidia at these levels into next week's earnings? Will it appear to be like paying Tesla at $400 when its market cap was larger than the next 10 car manufacturers combined. Momentum at the time was insane, governments were supporting EV roll outs with tax incentives and Musk appeared to have the one product that everyone wanted. 18-24months on, the world has changed, will the same happen to Nvidia? This is easier to see but harder to trade as the momentum, stampede is the dominant factor ahead of next week's earnings. Money is chasing price... Reuters - Global equity funds see big inflows amid stock rally
I'll leave it to the experts, or the passive investors to set the price, but The Last Bear Standing (Heat Check) makes an excellent observation .... "One might wonder what efficient market factor has tripled SMCI’s value in the past month, or what valuation multiple one should ascribe to a cyclical sector in its boom phase."
Theme 4 - Where does Rishi go from here?
Horrific by-election results for Sunak as Labour have taken two seats in traditional conservative "strongholds". Voter turnout was low but the swing in key conservative seats will be extremely worrying for Conservative HQ and pile more pressure on Rishi. Will he be forced to turn to the right as he gets out flanked by PopCons and/or Reform? Will he even be the leader to take the Cons into the next general election? Polls have narrowed as Starmer struggles to deal with Labours anti-Semantic issues, but after these results Cons may turn to Boris to save the day or potentially face wipeout at the next GE.
FT - Reform's success is not the real story of the by-elections
Reuters - Britain's Labour Party deals double blow to PM Sunak's Conservatives
The Rest is Politics - Sunak's by-election disaster, Reform UK gains momentum, and political crisis in Rochdale
FT - Reform UK voter support highlights threat to Sunak’s right flank
FT - Tories reel as Labour wins two by-elections and Reform UK gains more than 10% of vote
Theme 5 - The week ahead previews
ABN Amro - The week ahead - Feb 19-23
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