Foreword
This is a quick note, which tends to be just off the cuff thoughts/ideas that look at current market situations, and to try to encourage some discussions.
In just a few more hours, we’ll get the latest and final CPI print for 2023, followed 24 hours later by the final PPI print, and on the same day of the PPI print, FOMC rate decisions plus Powell press conference. The next ~40 hours is going to be very interesting indeed.
As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.
If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.
Update
Update to the trades (prior post: https://jankythoughts.com/2023/11/16/november-16-2023-breather/):
I made a bunch more bets on various earning reports, and ended up with a slightly larger gain. As of now, the only short-term bets I have on are:
- Long CAVA bearish put spreads till 12/29
- Long TLT bullish call spreads till 12/29
- Long QQQ bullish call spreads till 12/12
CAVA
CAVA IPO’d on June 15th, 2023 with about 14m shares sold to the public — the rest of its shares are prevented from selling for 180 days due to the standard lock-up for insiders in IPOs.
That 180 days of lock up ends on December 12th, 2023 (tomorrow).
According to Yahoo Finance, CAVA has about 113m shares outstanding. 14m of those were initially sold during the IPO, leaving about 99m. Of the 99m, some were probably warrants/stock options that were exercised, though the exact number is unclear.
But no matter how you slice it, a large number of new shares will become eligible for sales tomorrow, possibly up to ~7x the number of shares in the initial sales, representing ~66x the average daily volume.
Even if a small fraction of those insiders decide to sell, there will likely be a lot of selling pressure on CAVA, hence the bearish positioning.
TLT
This is the remnants of my long TLT play from when I first flipped bullish. It is currently up a substantial amount, but I think it can possibly go up a little bit more before I close this remaining portion of the play (see below).
QQQ
And the final piece — today I entered into a levered long position on QQQ, because CPI is coming out tomorrow (December 12th) at 8.30am.
Looking at the last CPI breakdown, a large part of the inflation in the measure is from housing. However, talking/listening to the fund managers of my private equity real estate investments, the common thread is that rent across most of the USA is stalling or coming down. This trend of flat/lowering rents started becoming pronounced around August/September, and did not appear to abate in November.
Therefore, I’m expecting CPI numbers to come in weak tomorrow, same as inflation numbers from Europe has been relatively weak recently.
This should, hopefully, result in a short term sentiment boost to stocks as traders bet on Fed easing, or at least an end to rate hikes.
Janky Thoughts 