Read on the Trading Floor - 20 Nov 2023
Today’s focus… Altman, Soft Landing and Seasonals
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Macro Themes At Play
Theme 1 - “I have no equity in OpenAI”
OpenAI's largest stakeholder (49%) has just hired the ousted CEO Altman and fellow co-founder / board member Greg Brockman. Altman isn't the first founder to leave a company, a return has already been attempted and now its reported 2/3 of staff are protesting to remove the board.
MSFT sits in the middle, ahead of a potential $86bln IPO valuation (66 times its reported revenue run rate). MSFT is up 50% in the last 6 months, and has ridden an incredible AI wave relative to Google as highlighted by Joe Weisenthal (Odd Lots).
OpenAI needs to raise capital as costs far exceed revenues, with many investors feeling Altman is at the core of that funding raise. However, the ease of his exit does make you wonder how the face of a generational technology, has no garden leave or non-compete. Maybe having no equity in OpenAI was the problem (as highlighted by Senator John Kennedy) and left Altman strategically vulnerable and/or interested in other ventures (like trying to raise $100bln for a microchip company to compete with Nvidia).
Some further reading of note from our AI channel on Harkster.com
FT - OpenAI: Sam Altman’s exit undermines company’s commercial potential
ZeroHedge - "Train Wreck Situation": Sam Altman Joins Microsoft As OpenAI Taps Ex-Twitch CEO
WSJ - Sam Altman to Join Microsoft Following OpenAI Ouster
Axios - Hundreds of OpenAI staff tell board to resign or they’ll quit
The NY Times - The Fear and Tension That Led to Sam Altman's Ouster at OpenAI
Bloomberg - OpenAI Negotiations to Reinstate Altman Snag Over Board Role
Theme 2 - Soft landing scenario is the base case
To quote the excellent
... "Is the US economy going to ‘do a Simone Biles’ and stick its soft landing." It's only natural, human nature that we're all looking on the bright side before the recession truly arrives ....The Blind Squirrel - Sticking the Landing
Project Syndicate - The Revenge of the Inflation Doves
Steno Research - Steno Signals #74 – Did King USD just break?
Steno Research - Positioning for lower yields and weaker USD
The force remains with the seasonals - softer USD, lower yields, higher stocks. As we saw in 2022, the year ahead previews are focused on hawkish BoJ adjustment, domestic wage gains and a US recession. Short USDJPY and cross-JPY gaining momentum and traction as we move back to the middle of the USD smile and JPY shorts sit at the most since 2018 (The Next Economy by Florian Kronawitter - Land of the Rising Yen?). The only difference YoY is we've yet to see the MOF selling USD.
Source Florian Kronawitter
Although Brent favours USD shorts vs EUR or GBP over JPY as USDJPY gap to yield differentials converges. Brent Donnelly - Authorities Winning
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