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Everything's peaking...
That's the general vibe. A few snippets I've collected on my recent internet travels...
Nomura's calling a peak on rate hike bets 👇
Here's what the market's currently pricing (via Westpac) 👇
The US 10 year yield has also peaked, according to Bank Of America 👇
As the Fed orchestrates "A Landing" - with no mention of it being soft or hard... Given the call, we can probably guess their thinking...
If they turn out to be right, Barclays stopped themselves out near the highs...
Amelia Pollard
Peak Mortgage Rates?
Mortgage applications are falling as rates increase...
Peak Inflation?
“The charts and the history, as interpreted by Larry Williams, suggest one crazy thing, which is that inflation could soon peak, and ... the stock market’s bottoming and due for a nice broad rally given from here to the end of June,” @JimCramer says. https://t.co/RwCqZvB6my
— Mad Money On CNBC (@MadMoneyOnCNBC) April 21, 2022
If Cramer says it, then it must be true right? It's not like he has a track record of being wrong about everything.
Anyway, it seems valid to (finally) start thinking about peak inflation now. 👇
Tim Vollans
Although the more important question remains... How high for how long?
LPL break down the difference between sticky and flexible inflation 👇
Not all inflation is equal. The Atlanta Federal Reserve breaks inflation down into ‘sticky’ and ‘flexible.’ As the name would suggest, sticky inflation is a weighted basket of items that change price relatively slowly.
Think things like motor vehicle fees, education, public transportation, and motor vehicle insurance. Whereas flexible inflation contains things that move more often, like motor fuel, apparel, dairy, and jewellery.
During the 1970s we saw both sticky and flexible core inflation soar, but thus far only flexible core inflation has moved significantly higher during this bout of inflation. Could this mean that flexible inflation could come back down just as quickly?
Five year inflation expectations are also off the highs...
But where one component goes down, there's something else to take its place... 👇
Tim Ellis
Even if/when inflation peaks, it'll be messy for a while.
Let's all laugh at Bill Ackman instead
He only bought Netflix 3 months ago, now he's thrown in the towel and lost $400 million. MegaLOLZ!!1!!
Except...
It actually makes sense. Ackman laid out the reasoning in a letter yesterday, and David's posted a superb explainer below (we'll be posting more on TradingView so give us a follow) 👇
These two quotes sum it up brilliantly:
"While Netflix's business is fundamentally simple to understand, in light of recent events, we have lost confidence in our ability to predict the company's future prospects with a sufficient degree of certainty,"
"One of our learnings from past mistakes is to act promptly when we discover new information about an investment that is inconsistent with our original thesis. That is why we did so here,"
It's all well and good focusing on the outcome, but how many people would so readily exit a recent position for a loss because their central thesis had changed?
There are plenty who would simply double down on the position and try to justify that the business is cheap (If you liked it at $390, you'll LOVE it at $230).
Not Bill. He even acknowledges that it would be no surprise to see Netflix rally from here 👇
We require a high degree of predictability in the businesses in which we invest due to the highly concentrated nature of our portfolio. While Netflix’s business is fundamentally simple to understand, in light of recent events, we have lost confidence in our ability to predict the company’s future prospects with a sufficient degree of certainty.
Based on management’s track record, we would not be surprised to see Netflix continue to be a highly successful company and an excellent investment from its current market value.
That said, we believe the dispersion of outcomes has widened to a sufficiently large extent that it is challenging for the company to meet our requirements for a core holding.
He could be right. This guy ran some numbers to see what happens if you buy when Ackman sells (and hold the position for a year). Small sample size but interesting nonetheless. 👇
Will Bill Care about those "missed profits"?
Will he b***ocks.
He's already eyeing up the next opportunities.
We are in the midst of an opportunity rich environment for Pershing Square due to the dramatic shift in Federal Reserve policy, the highly inflationary environment, geopolitical uncertainty, and the resulting high degree of security price volatility.
We therefore expect to find a good use for the Netflix proceeds
Some excellent lessons from the whole episode.
Have a read of David's thoughts on Pershing's Netflix bet here 👇
(Spoiler: He doesn't think it was a strong bet in the first place...)
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