A simple recap
What I’m watching
This coming week the focus continues to be on the big tech earnings, with MSFT, META reporting on Wednesday and AMZN and AAPL on Thursday. The key remains to be on their capex guidance as well as how they think about their AI monetization plans.
This past week we saw GOOG reporting surging earnings which was attributed to AI monetization (Cloud revenue and leaps in google search usage due to Gemini) and to a larger part SPCX IPO. They also pledged further boosting capex to $195-205b for fiscal 26 compared to previous $180-190b.
Another key event is the FOMC on Wednesday. After Warsh voiced dissatisfaction with forward guidance, the market has been adjusting to higher perceived volatility in rate trajectory. Given current Iran war flare ups and recent slew of Fed speech that is leaning hawkish, even including the Fed chair himself during his testimony, the market is currently allocating some non-negligible chance of a hike in the near term, even as soon as next week.
Also over the past week, there have been major escalations in the Iran war as the US continued air strikes over Iran and Houthis reportedly attacked Saudi ships in the Red Sea, potentially choking the Red Sea exports of oil. Over the weekend, however, the hostility appears to have paused. Whether this can last and lead to more diplomatic efforts remain to be seen.
A position or thesis
Added to the IBM position. Saw some optimistic signs on Friday as well so will be keeping an eye on that.
For the FOMC rate hike potential, my view is that the market is pricing in too high a risk of an actual rate hike. My thesis is rather simply that this year is mid terms and Trump has repeatedly bashed the previous Fed chair Powell for not lowering rates. Given Mr. Trump’s past behavior and that he almost hand picked Warsh as the Fed chair, it is inconceivable to me at least that Warsh is going to actually deliver a hike. Of course he can be hawkish leaning and stay put. In fact, my guess is that they will come up with some modification to the inflation mandate, by referencing a different inflation metric or saying 2.9% is 2%.
Further, I’ve recently given some thoughts about what Warsh and other policymakers or stakeholders have been saying that AI will be disinflationary in the long term and boost real wage growth and production. My view is that this only happens if AI can enable us to do something that without it no matter how much manpower we throw at the problem we still can’t. An analogy for this is airplanes, in that no matter how you search you simply can’t find a human that can fly. And given that the world economy, especially the US economy is heavily betting on AI to work out, I suspect that if there are signs of weakness in AI in any sort of way in terms of its monetization and continued investment, the government might step in and artificially boost demand. Basically QE forever.
It is for these 2 reasons that I’ve been adding to my gold holdings, which will be a long term position and serve as an anchor.
What I got wrong or updated
I did some flip flopping in the SOXS. I exited SOXS the week prior, and then got involved on Monday late in the day again. The thinking at the time was that Monday’s SOXX close was quite bearish and I thought the bounce had run its course. I was aware of the possibility that SOXX goes a step further to hit the 21EMA on the daily chart.
And sure enough it did and it caused some capital destruction (very small position so not too painful) on Tuesday. I exited the position on Tuesday in the morning to wait it out because apparently the thesis in the short term is at risk. I reentered a halfsized position later in the day as it got close to the EMA. Wednesday it ran strong again ahead of GOOG earnings, and I added another half of the position late in the day.
I also exited the IGV position on Wednesday as it fell below the small consolidation range that it built since July. It has since returned to an interesting spot again and could renew a push higher, which I will be watching to see if I should engage again.
The Ephemeral Tourist 