Weekly Recap | February - W2
Tariffs, Inflation, Job Reports & DOGE Impacts, CapEx & Computing Power Demand, the EV War, GLP-1 Demand, Chinese Bull Run, SoFi & Cryptos, Celsius Position, Earnings & Fair Values, Weekly Plan & SWF.
Macro.
The situation remains the same in the United States & the data continues to point to a potential end of QT soon. In brief and without going much over the charts, the labor market continues to slowly weaken, inflation remains stable although we’ll talk about it a bit more, the debt ceiling isn’t resolved yet & the reverse repo and TGA continue to be drained of their liquidity.
Powell said that cuts would come only with a weaker labor market and stable inflation. That’s where we are. And QT will eventually need to end to push liquidity back into the government accounts… So we’re still good, short term.
The worries remain the same: tariffs and consumption.
On tariffs, we had a rapid resolution, as expected, with Mexico & Canada, where both countries accepted to control their border better in exchange for a 30-day delay. The situation will be re-evaluated then, and if the United States are happy with the measures taken, I assume we’ll have more delays.
The situation isn’t perfect but stable enough, although to talk true, Trump holds both countries by their d...
Now that this has been cleared & pressure is set, Trump turns himself towards its next victims: Europe, Japan, China, and very probably everyone else.
The only question is how far will those countries resist; Europe already caved in less than an hour which isn’t surprising, but some will be harder. The market now knows the dance: pressure from the U.S. but possible negotiation. The worry is about how long countries will hold against pressure & potentially see tariffs really applied, and how this will affect inflation.
Some believe it will impact it big, like the Michigan Institute which published its inflation expectation next year to be around 4.5%…
I have no idea & don’t do predictions, but tariffs sure are inflationary short term while the continuous money printing will boost this inflation. Potential rate cuts & necessary QE won’t help. But it’s impossible to know to what extend.
You guys know by now this has been my base case for the medium term. A bubbly market through liquidity injection into inflation & potential recession. My view didn’t change, only the question remains about timing.
We also need to talk about the DOGE's work, which have been very aggressive. I won’t comment on my opinion of it but I can comment on the economics behind. Based on the numbers shared by the official account, they’ve approximately cut $1B of expenses so far - which isn’t even a drop in the lake. You need to multiply that by 1,000 to start making a difference but that’s not my point here.
My point is that even if it is nothing from a government point of view, it represents jobs, contracts, companies - legit expenses or not; again, not my point. My point is that this liquidity won’t travel through the economy anymore & will impact consumption & certainly some households as people end up jobless now.
This isn’t good for an economy.
Short term pain for long term gain, we could discuss this but I’m only talking from a market & investing point of view here. It’s very small so far, but if they continue with that aggressivity & speed, they’ll give a push to push the economy towards a recession. Still far from there, but it sure grows the pressure.
Same old story. Things are good short term with liquidity flowing probably for some more months. But the medium term isn’t very bullish & the new government sure took its job seriously, going all in day 1, something I personally didn’t expect.
Watched Stocks & Portfolio.
CapEx, AI & Computing Power.
This remains one of the big subjects today & we can talk a bit more about it now that the "Magnificent Seven" have reported earnings. First, as I shared yesterday with Google’s earning review, those companies are excellent at spending.
Microsoft is struggling a bit, but the other three have been excellent at managing their investment so that they return growth, and the result is really great since investments started to flow towards computing power two years ago or so.
Those companies plan to continue doing so as they raised their CapEx predictions for next year. Numbers are mind-blowing. Amazon $104B, Microsoft $80B, Google $75B & Meta $65B, most going towards infrastructures.
This is why I remain bullish on Nvidia first as it means growing demand for hardware. And I remain bullish on Nebius as, besides hardware, those companies claimed that the demand for computing power is growing & their actual infras aren’t enough.
The thesis that even when data centers are built, demand for their usage will grow is turning out to be true, and this won’t change because it becomes cheaper, on the contrary.
Everything to say that it seems like we still have some time for our cyclical business.
Chinese Bull Run.
Been waiting for this boy for a long time & I gotta say, things played out perfectly, too perfectly. This was shared on X 4 months ago.
Since then, the stock touched $120, fell back down to $80 & bounced back, around $105. I remain extremely bullish for the Chinese market & if this trend continues on other names as well, I’ll start to rotate liquidity on those assets.
Cherry on top, Trump announced this week that he’d delay the suppresion of the de minimis imports from China - saying that anything under $800 wouldn’t be taxed. Great news as it gives some time for Chinese e-commerce to find an alternative or convince America to let them do their business as they used to.
China is massively undervalued based on American stocks standards, and if liquidity were to jump ship, we could certainly have huge returns.
Hims & GLP-1.
We have seen yesterday in the earning reviews that demand for GLP-1 continues to grow very rapidly - as a weight loss drug. The branded products aren’t enough to answer the demand. Novo Nordisk knows it.
This is very good for Hims, who will attract lots of customers for its compounded drugs & probably expand their consumption to other drugs.
The company’s ad goes live today at the Super Bowl. Results will take some months to show but I hope the company will give some data before.
Still very bullish for the company, I took some profits with the calls I bought weeks ago but am still holding 100% of my shares.
The EV war.
We had Ford’s results this week where the company announced that they lost $37,000 for each EV sold. In other words, they need to sell their cars at unprofitable prices, as if they were to make a profit, no one could afford them.
I think this explains perfectly how strong & dominant Tesla is in the EV business. I talked about it often now but no one in the West can have a profitable business & Tesla has made it through violent cost savings, engineering & optimization.
Another important thing. EVs are software on wheels, they are not 100% hardware like cars used to be. Anyone buying an EV from an unprofitable EV manufacturer exposes themselves to a potential lack of updates or maintenance in the future. This should create huge problems for owners.
Everything to say that EV equals Tesla, or Chinese. Up to now, there aren’t viable alternatives for the long term for investment but also consumption.
SoFi & Crypto.
I talked two weeks ago about the cancellation of the SAB#122 on the accounting of crypto assets for banks, which was preventing them from offering crypto services to their customers. This was already really fast but this week the FDIC announced that they’ll work to review their regulations.
Great for SoFi which had crypto services & was forced to close it. There is a demand for those services in the U.S. and banks proposing it will surely drive more fees & a growing demand for those assets.
Things are really, really moving fast in the U.S.
Celsius position.
I closed my Celsius position Monday after the stock printed a new low & kept falling.
Volume continues to grow but there aren't enough buyers to hold the price, which isn't a tendency we want to see. There is no point in holding a stock while it falls, as long as the market isn’t ready to print higher highs & higher lows, I’ll be out.
Even if my thesis is right, at the end of the day, the market decides if you make money or not.
Earnings.
We are closing a long week of earnings, I commented on the ones I was interested in and here’s the list of the stocks and their fair value to me - as in the price at which I would consider buying them.
Next Week.
The fun continues next week although it has fewer important companies to me. You guys will have a report on Friday for Airbnb - which I do not hold but still follow closely. The rest will be done on the Saturday write-up!
Other Subjects.
Sovereign Wealth Fund.
The U.S. president also signed an executive order for the creation of a sovereign wealth fund, a very good thing for the market. A SWF is basically a governmental portfolio for any kind of assets.
It could become a QE on public companies & assets if funded by debt, which would be of course very, very bullish for assets prices.
This is just news for now & no specifics were given on the assets or how it would be financed. Tons of news are coming in the next months as we will have our answers about it but also about how the government will treat cryptocurrencies.
Although those two things could merge into one & we could imagine having some cryptos inside of a SWF.
Wait & see.