Good Wednesday evening, MacroEdge Readers & Community,
Well, it’s that time of the week. I’ll pass the baton to Six for the Strategy Note, where he’ll discuss his latest thoughts on the markets, changes to our Flagship Portfolio Strategy, and much more. While we often share fierce discussions on market dynamics, macro challenges, and much more throughout the day, our Flagship Portfolio Strategy stands as the unified result of everything we’re doing. Markets this week were relatively noisy and uneventful until after hours, when Google and a flurry of AI-related companies delivered their earnings reports. Google sank heavily as it guided capex down, and Microsoft and Oracle also noted lower capex guidance. This is the earliest stage of our thesis that the data center construction cycle peaks either this quarter or the next. There are signs it may be Q1, due to the lag time in politicians changing seats and the time it will take environmental groups to spool up the lawsuit campaigns that I expect to gain greater teeth at the turn of the year.
There are so many interesting things happening in the world right now that I’d call this the most interesting period for global macro since the pandemic and the inflation period that followed. That doesn’t mean it’s time to over-trade, panic, or let a billion different data points cloud one’s headspace, and I’m always working to not let that happen for myself either, especially on core convictions right now. One of the things I’m most looking forward to is updating the ‘Powell’s Valhalla’ roadmap I first began penning in 2023. While we no longer have Powell as Fed Chair, the concepts, market issues, and broader macro topics are still very relevant, and I’ll cover them in a late-evening/Saturday-morning post from New York City.
Changes are underway on our website and will soon be underway on our Substack platforms, and I look forward to seeing them completed. Across our different report series, it’s going to be much easier to find previous reports and whatever you’re looking for, which currently isn’t that easy on Substack. Outside of that, we continue to prepare for a fantastic 2027 across our businesses, and I look forward to providing tonight’s Oil and Gas Research update over at MacroEdge Oil and Gas Research on Substack…
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Upcoming Reports:
(Tonight) Oil and Gas Research Note
(Friday) Redeye Macro Note - Updating ‘Powell’s Valhalla’ Framework
(Saturday) Oil and Gas Research
(Sunday) Weekly Macro Note
The Fed held with 2 dissents, the statement upgraded growth to “strong”, Warsh called financial conditions “tighter” but not tight, and announced a step down from 8 rate-setting meetings to 7 in 2027, and 6 in 2028. The curve steepened.
● Still think peak yields is in. Any selloff on the long bond from here will be used to re-lever long bonds.
● ORCL guided to peak capex in fiscal 2027-2028 and the stock rose. MSFT guided to FCF positive in 2027 alongside a great quarter and the stock rose. GOOG guided to “significantly higher” capex in 2027 alongside a bad quarter and the stock plunged.
● Since the October 6th public launch date of our investable strategy on Plutus, the book is +11.1% against -0.4% on SPX. TM and NCLH were sold on Oct 27, a VIX call hedge was added.
Seventeen sessions in, the model is +11.14% gross from the Oct 5th close. The book made a new high on Oct 27 (+12.98%) and gave back 1.63% today on the Fed selloff, the deepest pullback since the launch date. We remain long rates and rate sensitives and are currently positioned with a high degree of sensitivity to yields.
