As we said in our previous post, a key “tell” of whether the “Wall of Supply” can continue, is to monitor whether the IPOs “pop” on the first day and people make money off them. Well, SpaceX has made a lot of money for employees, VCs and now public market investors so that’s a tick in the box✅. It’s only been a day, so lets see how it goes.

We also review the Rotation Trade setting up with a potential Hormuz re-opening (37th time lucky?!).

Lastly, we present an interesting Event situation using our most advanced ShrubGPT model aka the “Back of the Envelope” (because I didn’t have an FT lying around to use the “Corner of the FT” 🤭).

Checking “Under the Hood” of the Market

With all the excitement of the last couple of days, the MAG7 are down 9% from the highs, since they were used as an ATM for liquidity …

…which keeps us fixated on our “Nasdaq Meme Levels”:

• The “Buffett Meme Top” at NQ 30,666

• The “Shrub Meme Bottom” at NQ 28,444

• The “OpenAI Meme Top” and the “SpaceX Meme Top” at NQ 29,666

• (Coincidentally the NQ closed on Friday at 29,662)

If you think this is a joke, it’s because it really is.

Rotation Setting Up

On a positive note, thanks to progress with Iran, which we hope results in a deal this time (37th time lucky!), we saw some “tepid” Rotation into “non-AI” trades with Europe, Copper and other Metals catching a bid and the Russell making new all-time-highs, though Semiconductors were also strong because none wants to sell what’s working. The one sad spot remains China.

Europe in particular looks pretty good. Europe outperforms the US when Crude falls (see chart), for the simple reason that Europe doesn’t have reliable energy supply (with France being the exception thanks to Nuclear). In spite of its problems, this chart makes me want to own more “Europe”, and I know it sounds disgusting but wait until you see the European football teams in the World Cup and you might get excited to.

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Though we closed our Puts at NQ 28,444 for a respectable 3.5x return I want to be clear that this isn’t the “all-clear” for risk <pun> and we are sufficiently cashed-up to sleep like a shrub at night.

Speaking of sleeping, people finally woke up to the “Wall of Supply” risk that we’ve been highlighting for a month now…but there’s a problem …

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We have a successful track record of multi-baggers in Quantum Ponzis, Spinny Ponzis, Nuclear Ponzis, Drone Ponzis and more recently in Space Ponzis.

We are now getting ready for the next “Ponzi du Jour”, which should be pretty obvious to the trained eye…

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We warned extensively as to why this drop could happen in a series of articles titled “The Wall of Supply”, where, in simple terms, the upcoming supply of Mega IPOs such as SpaceX would suck liquidity from everything and put a strain on the Market:

This dynamic got exacerbated by Google skipping the queue to raise $80bn in Equity, and now META looking to do the same, because they know that whoever is left last to raise, will be left without a “chair” in this game of “Musical Chairs” and risk oblivion..

Another bearish argument is that even “Boomer” fund managers are already all-in the AI trade, proof being that even Buffett developed FOMO at the tender age of 100 to put $10bn into Google in its quest to create a “Digital God”, though we know it’s not Buffett’s doing but the new guy’s:

We still called Nasdaq at 30,666 the “Buffett Meme Top” ™️ because it sounds poetic.

But this is not why I’m sitting on a fine Sunday to write this.

Usually market commentators come out after a correction to calm you down that, even if in the short-term the market goes lower, eventually the market rebounds into much higher levels after 1-week, 1-month , 1-year. I did my part on Twitter:

…but I’m now going to tell you the opposite:

In the short-term we might be ok, but I’m seriously worried about the long-term …

…and I’m not talking about the Markets. I’m talking about Capitalism & Freedom.

The US Government is considering taking stakes in AI companies like OpenAI, Anthropic and xAI so that .. “American people can benefit”…

I know that every Wall Street monkey would sell their soul for a 2% bounce in the Nasdaq … and indeed this could be taken as positive in the short-term but …

… WHAT ON EARTH ARE WE ACTUALLY DOING HERE?!!!

Yes, I know the government already has stakes in Rare Earth Companies and Quantum Companies and Intel but …

… what are we doing taking stakes in corporations whose product can covertly influence public opinion and even “hallucinate” a new version of history?!

Before you all get triggered that I’m suffering from Trump Derangement Syndrome (TDS), let me make one point abundantly clear:

IT’S NOT TRUMP I’M WORRIED ABOUT, IT’S THE NEXT GUY (OR GAL)!!!

Don’t believe me? Bernie Sanders is proposing a bill to give the public 50% of AI companies (source)…

Now imagine if a socialist politician becomes President.

One can say that I’m actually suffering from Socialist Derangement Syndrome (SDS), but those who lived under Socialism know very well that it usually devolves into Authoritarianism.

Remember the level of government control we had during Covid?

The US wasn’t as bad as China…

…which is one of the reasons why China trades at 12x PE and the S&P trades at 25x, but those reasons could quickly disappear…

Here’s one: Chamath highlights the pricing gap between the best-in-class AI models to open-source AI models like Deepseek (tweet here):

He adds that “you can expect the run rate revenue growth of the frontier labs to go down meaningfully and the revenues of the open models to skyrocket.”

Gee, I wonder what that could mean for OpenAI…

… maybe it would need a bailout AFTER the US taxpayer becomes a shareholder…

…which reminds me how, back in my day, the government used to bail out companies AFTER they went bankrupt, not AFTER they reached $1 trillion valuations!

I guess we need a meme for that:

This is all such nonsense, I’m outta here.

Good luck out there!

🌳🙏

Disclaimer:

This isn’t financial advice. This is Parody. This is the equivalent of Monty Python and Spaceballs for finance, but worse: This is the trading blog of a shrub. For all you know, I could be a 15-year old paper-trading out of my parents’ basement. Don’t be Stupid. Seriously. How many times do I have to repeat this.

Today we are going to get a bit darker, as we invoke our inner Machiavelli:

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• Google (ticker: GOOG) is raising $80bn in Equity to fund its AI Capex Plans:

  • $30bn by placing shares & mandatory convertible preferred stock

  • $40bn At-The-Market (ATM) offering

  • $10bn equity placing to Berkshire Hathaway

I don’t know where to start, but let me try:

• Google made $174bn in operating cash flow as well as raised $85bn in debt over the last twelve months, and is now raising a further $80bn in EQUITY because…

• …its 2026 Capex will be $180-190bn and significantly higher in 2027…

My question to Google is:

• “HOW MUCH DOES YOUR DIGITAL GOD COST TO MAKE? WHERE DO YOU DRAW A LINE?!”

I bet you they don’t know the answer.

In fact, it would be even funnier if they asked their AI to stop burning cash and the AI just shrugged them off and kept going, just like a scene from Space Odyssey 2001:

Jokes aside, but not really, this is a fully conscious decision by Google in their pursuit to be first to reach AGI. In Sergey Brin’s own words: “We fully intend that Gemini will be the very first AGI”…

…which reminds me of another Space Odyssey 2001 quote from HAL:

• "This mission is too important for me to allow you to jeopardize it."

OK, enough of that. I have a different question:

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I really wanted to turn bullish on Software, but then I made a game called Shrub-man in a few hours and my excitement wore off. However, it’s equally dumb to completely ignore the sector, especially when some stocks can provide great meme material and solid returns…

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…because I took one for the team and went through the SpaceX financials in the newly released S-1…

…and with $19bn Revenues and a $1.75 trillion valuation, it really isn’t difficult to find a stock that’s cheaper than SpaceX at 100x Sales!

But don’t you worry, the TAM is ginormous, approaching $28.5 trillion funny money, since it’s not just the World that is Elon’s oyster, but the Universe itself!

I’m actually super-bullish the Space Economy because at the rate we are going, Earth will be destroyed and we will have to immigrate to a new planet … in which case a golden ticket on the SpaceX escape-pod will be worth anything that Elon wants … just like his SpaceX valuation…

…though I’m surprised none noticed that the TAM related to Space is already close to SpaceX’s valuation at $2 trillion (!), and the remaining $26 trillion TAM relates to … AI!

Anyway, lets brush this little detail aside and focus on our stuff…

…because while everyone will rush to buy SpaceX at 100x Sales, we’ll be cocooning in a SpaceX peer trading at a fraction of the valuation…

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Space-X is about to IPO. Valuation is horrendous but investors are still going to buy it.

We know it’s all stupid and we are pretty good at playing along…

… that’s why we wrote on the Space theme well in advance in anticipation of this moment:

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We just got the first major IPO, with semiconductor company Cerebras (ticker: CBRS) trading up +68% on its first day and now trading at a cool $67bn market cap and 150x Sales because who cares really.

What happens next?

Here’s the funniest outcome:

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• The “Doomer Boomers”, who focus on “mundane” assets likes Crude

• The “Token Maxis”, who are spending tokens in order “to escape the permanent underclass” (which is basically the new way of telling the boomers “have fun staying poor”)…

…and both have lost their minds, in different ways!

Being a parody publication allows us to explore completely random topics (it also allows us to get away with memes such as the one below) …

… which led to today’s Shrubstack, where we compare MEMORY with TUNGSTEN!

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Tim also writes a substack on energy that you can find here so do check it out, it’s free!

Good luck out there!

🌳🙏

Disclaimer:

This isn’t financial advice. This is Parody. This is the equivalent of Monty Python fo…

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• The “Doomer Boomers”, who focus on the Crude price and the disconnect between the “physical” and “paper” markets

• The “Token Maxis”, who are spending tokens in order “to escape the permanent underclass”, which is basically the new way of telling the boomers “have fun staying poor”

Both of these types have been making money in their respective trades, with the Semiconductor Index and Brent both up +10% in just two weeks.

From our part, our Brent Call Spread detailed in 8x-Bagger Tail Risk Hedge * is already a 3x-bagger, we sold 1/3, made it “free” and gave thanks.

The question now is:

• “When will the Equity Markets care about the Oil Price?”

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First of all, congratulations to Intel for managing to surpass its 2000 dot-com all-time-high after 26 years…

…proving once again that semi-conductors are “safe as chips” and definitely not cyclical…

…which is why the Semiconductors Index (SOX) enjoyed a +50% rally in a month and is now the most overbought it’s ever been (source: BofA)!

“DOW 50,000” Meme Top?

The performance of various asset classes this week is very interesting:

• Brent +13%, SOX +11%, Nasdaq +2.4%, S&P +0.7%, DOW -0.4%, DAX -1.3%, Brazil -3.4%, KWEB -4.3%

Hang on… the best performing asset class was … CRUDE?!!! More on that later…

Excluding Crude, we could summarize the asset class performances as such:

• Everything except AI sucked…because AI sucked the liquidity.

Yep, we are back to that Liquidity Vortex, and I don’t like it…

It gets worse…

…because while everyone was cheering the Nasdaq rally, the Dow topped on Tuesday when Trump mentioned that “the DOW is at 50,000”…

… i.e. the “Boomer Index” once again failed at the “Dow 50,000 Meme Top” level that Pat Bondi jinxed back in February.

Crude Awakenings

Back to Crude.

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Good luck out there!

🌳🙏

Disclaimer:

This isn’t financial advice. This is Parody. This is the equivalent of Monty Python for finance, but worse: This is the trading blog of …

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There is a simple explanation as to why:

• A visible risk will keep “worried” market participants out of the Market…

• …and these “Panicans” will be forced to buy as the skies become clearer…

• …which gets the Market to grind higher into this “Wall of Worry”.

• It is why we often get a “Sell the News” event once there are no more bad news left, which is when the last “Panican” has bought back in.

Well, we should rename the current setup as the “War of Worry”.

Every announcement of a ceasefire adds +5% to the Market, whereas every resumption of War takes away -0.5% at best…

An actual Peace deal could be a “Sell the News” event (after all, this is the funniest outcome)…

…but we don’t have to “worry” about that, since Iran didn’t even show up to negotiate with us…

…which means there is only one “true tail risk hedge” to protect against the “War of Worry” dragging on:

• Crude itself.

We detailed the trade in “8x-Bagger Tail Risk Hedge”, but it’s quite simple:

• Unlike the classic case of the “Wall of Worry” where we are dealing with “paper” assets, the longer this “War of Worry” drags on the more the physical shortages will build up in the real world.

• The Equity markets may not care, but the Oil price may eventually adjust, making it the only real tail risk hedge…

• …now If we could also figure out how to power my car using “paper oil” …

Good luck out there!

🌳🙏

Disclaimer:

This isn’t financial advice. This is Parody. This is the equivalent of Monty Python for finance, but worse: This is the trading blog of a shrub. For all you know, I could be a 15-year old paper-trading out of my parents’ basement. Don’t be Stupid. Seriously. How many times do I have to repeat this …

The trade was long Amazon (ticker: AMZN) and short Walmart (ticker: WMT).

The thesis was quite simple:

• Amazon traded down to below 30x P/E while Walmart traded at … 50x P/E!

• At the same time, AMZN’s revenue growth is +12% per year, compared to WMT’s +5% revenue growth.

• i.e. AMZN trades at a substantial 40% discount to WMT while growing faster, and that’s without even mentioning the “sprinkle” of AI & Anthropic.

• At the same time, Walmart hit a “Meme Top” moment as THREE of the members of the Walton family entered the Top 10 Rich List.

The pair trade has since returned close to +20%…

…which isn’t bad for a market-neutral, trillion dollar trade!

In fact, these are the trades that pod monkeys salivate for, since they can put them in size while keeping their risk managers happy!

Here’s the funny part:

• The performance of the trade was entirely thanks to the +23% rally in AMZN!

• Walmart at 50x P/E?! No sweat! Deep value territory!

…which proves the point for the gazillionth time that the Market is as unpredictable as my 4-year-old and will do whatever she wants, whether you like it or not!

In any case, I’m out of this trade and gave thanks.

I’m thinking more about these relative value trades, as we discussed in “Easter Bunny Special”, though I should’ve renamed the piece to “Pod Monkey Special” and charged 2/20 for it 🤭

Earnings Season Clean-Up

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“Barclays Downgrades Avis Budget to Underweight, Raises Price Target to $150”.

Then I checked the share price of Avis Budget (ticker: CAR).

It was at $609. Huh??!

Then I noticed that the stock went up by +$115 in ONE DAY.

i.e. it added in value the share price TARGET of Barclays in ONE day!

I didn’t even bother to check the valuation.

After all, Valuation doesn’t matter anymore … it hasn’t since 2020, or 0 A.C. (“0 Anno Covidi”).

But it’s still weird to see a car rental company rocket up by +500% in a month, during the biggest energy crisis since the last one, outperforming all my space ponzis that actually went to the moon!

The question I have is: “Why this one?!”

To start with, CAR has 35.3m shares outstanding but a “free float” of only 16.7m shares per Bloomberg.

This seems understated because:

• - The largest shareholder, SRS, owns 17.4m shares (49% of the company)

• - the second largest holder, Pentwater, owns 7.8m shares (22% of the company)

This would put the “free float” at only 10.1m shares, assuming that neither SRS and Pentwater are sellers (a BIG assumption).

Per Bloomberg, the short interest is 9m shares or 54% of Bloomberg’s float, but more like 90% of our estimated float.

Et voila. There’s your explanation why the stock rallied by +500% in a month.

(We can also blame options, but those just added “fuel to the fire” or even were the match that “started the fire”).

Lets add another dimension that is very important:

SRS is a multi-billion hedge fund run by Karthik Sarma, a “Tiger cub”. They’ve been invested in CAR for more than a decade and entered a co-operation agreement with the company in 2016. Karthik himself served on the board since 2020.

Since the cooperation agreement between the two parties, CAR proceeded to buy back shares and reduced its shares outstanding from 95m to 35m over a decade!!

At the same time, as can be seen from the chart above of SRS’ ownership in CAR, SRS actually added to its CAR stake since 2017.

Frankly, this is an incredible lesson in activism and investing by SRS. Well done to them.

There is one element missing to complete the home run, and that’s to actually cash out eventually, but I guess none cares about booking profits in this market.

Another Question pops up…

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Good luck out there!

🌳🙏

Disclaimer:

This isn’t financial advice. This is Parody. This is the equivalent of Monty Python for finance, but worse: This is the trading blog of a shrub. For all you know, I could…

Read more

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