Positioning

Plus: A major Catalyst that may move from Page 14 to the Front Page

“It's time to play the music,
It's time to light the lights,
It's time to meet The Muppets on The Muppet Show tonight”
- The Muppet Show Theme Song

A couple of weeks ago, while monitoring Yellen’s trip to Asia, I became a little bit suspicious of a mini-Plaza Accord brewing in the background.

Since Yellen’s trip to Asia:

• The HSI has rallied by +15%. The Chinese Tamagotchi* got what they wanted

• The US10yr is tighter by 20bps to 4.5% and the Nasdaq is +5%. The American Tamagotchi* got what they wanted

• The Yen appreciated to 153, flushing out the shorts. The Japanese Tamagotchi* got what they wanted

I don’t know what’s more silly: believing in this conspiracy theory or believing that this was just a coincidence. (*reminder: Tamagotchis are the Policy Makers and their simplistic Reaction Functions that make them act decisively when triggered)

All I know is that believing in this conspiracy theory ended up being highly profitable for my portfolio. After all, the P&L is what counts. We give thanks.

Jobs & Rate Sensitive Stocks

On Friday, we got the weakest job report since October 2023, where the US added 175,000 jobs compared to an estimate of 240,000. The average hourly earnings only grew by +0.2% MoM compared to an estimate of +0.3%.

For the purposes of a Fed that is so desperate to cut, deceleration in payroll growth and weaker wage growth is what they wanted to see.

For the purposes of our positioning this has also been welcome news: I have been highlighting an opportunity in beaten-up, rate-sensitive stocks (see “Self Esteem”) and this is the kind of print that we also wanted to see.