Being right is so BORING

It just keeps happening though...

Author

Tim Vollans
January 17, 2024 • Estimated Reading Time: 5 minutes

⚡ The Spark
Being right is so BORING

It just keeps happening though...

Obviously not ALL the time. That would be crazy talk. Or outright lies.

That said, the moves we’re seeing this week (a stronger dollar supported by rising yields, with stocks under pressure) hasn’t caught us by surprise.

We published “Tactically Bearish & Probably Insane” last week for premium subs.

The general premise was that the market was getting way ahead of itself with rate cut pricing & expectations.

That narrative was set to be challenged this week with Waller’s speech yesterday a key event:

On Tuesday, Governor Waller speaks. He hasn’t really said anything since endorsing rate cuts in November.

Will he now endorse the March cut and path the market’s pricing for the rest of the year?

Or will he tell the market they’re completely insane (unless they think the economy’s about to die…)?

We got the expected answer:

[The Fed funds rate] “can and should be lowered methodically and carefully”

“No reason to move as quickly or cut as rapidly as in the past”

Fed Governor Waller

We also mentioned the potential for a retail sales beat today…

And retail sales came in above expectations (0.6% vs 0.4%), with the control group (which feeds into the GDP calculations) hitting a stonking 0.8% (exp 0.2%).

None of this has really changed the trajectory of the economy, nor the likelihood of seeing some number of rate cuts this year.

It’s more that the market became too attached to one outcome. 

To the extent that rate cuts had driven bond strength (lower yields), dollar weakness, and the stock market rally, that pricing needs to be unwound.

Short version: When the data challenges the narrative, there tends to be opportunity.

That’s what we’re seeing play out now.

🧠 The Big Brain
Hang Seng & China - So Over

Or so back…

While we’re on the subject of being right or wrong, Chinese stocks are getting KILLED.

We’ve been nibbling, watching & waiting for these value fly traps to turn around since last Autumn (Well, Tim has, David wants nothing to do with them).

Today’s big overnight dump drew attention to their plight, & we’re thinking it’s time to cautiously dip a toe back into Chinese water (torture), see if we like the temperature and wait for a catalyst to set things on their way.

Here’s what we’re thinking:

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đź’ˇ The Lightbulb
Not so Super, Dry

Adapt or die

At the end of last year, David added SuperDry to that list, focusing on their horrific financials and trajectory:

@fink.tok

This #ukbrand will not last the next 5 years! Let me know if you agree! #ukfashion #ukcompanies

Superdry’s share price has fallen by a monumental 99% since the peak in 2017…

It’s not looking good.

Fashion is an ultra-competitive business so even if this is successful, it’s just the first step on the road to any kind of recovery.

Unless Superdry can drastically adapt their strategy, rebrand & relaunch, it’s hard to see the path back to profit…