The Week Ahead
Volume 63 - I'm a Barbie girl, in a Barbie world
“The noblest pleasure is the joy of understanding.”
-- Leonardo Da Vinci
A good afternoon to you all, wherever you may be. It has been a while since I managed to post on a Sunday. A promise is a promise…
An excellent week for trading; paid subscribers had a great week with SPX, GOOGL 0.00%↑ & META 0.00%↑ call spreads and EBAY 0.00%↑ puts. At long last, some volatility in the FX world (not for the right reasons) also gave us some lucrative opportunities in both cable and the euro… We remain long the euro from 1.09725 (stops are at breakeven after cutting 1/2 for +70 pips).
A busy week ahead with both AMZN 0.00%↑ and AAPL 0.00%↑ reporting earnings. Both the BOE and RBA are set to hike 25bps—a few data prints this week with non-farm payrolls on Friday.
The Usual Charts…
Over half of the S&P (market cap) has reported, and earnings have been positive, though lots of low bars to beat. META 0.00%↑ had a relatively high bar to beat, and earnings were solid. Capex was one of the main things participants were looking at/waiting to hear about - the $2B legal expense had a few heads turned. Q2 FX-neutral ad rev growth was 13% YoY, Q2 revenue was higher than expected, and 11% YoY (~100bps FX hit). Revenue guidance came in higher than many had expected. Reality Labs is still a money burner, but everyone expected that…
Below is the post where I went overweight (10%) META at 91… currently 8% weight.
GOGL 0.00%↑ earnings revolved around the better-than-feared theme… Search revs came in better than expected/feared; Q2 search came in 4.8% YoY. Youtube also surprised (Youtube Ads rev growth +4.4% YoY). More on Youtube… Very positive commentary on Shorts engagement, now watched by 2B users every month (1.5B a year ago). Cloud had solid revenue growth (+28% YoY). On the flip side, Capex growth is expected to accelerate in the second half of the year into 2024 due to investments in TPUs, GPUs etc.
I expect the strong upside move was also aided by cover-bid, as many were using GOOGL as a funding short.
GOOGL is my largest weighting at 10.3%.
Not much to say about the FOMC… As expected, 25bps. Jay just used his prepared answers for all questions. The market needed to re-read the transcript to make its mind up… The reaction came Thursday morning, though the party was spoiled four hours into the session after a BoJ YCC “tweaking” headline hit the tape.
ECB meeting reaction was laughable; I am not in the boat that the ECB is stopping or pausing anytime soon. Any premature pause from the ECB would most definitely be a policy error. Off the back of the reaction, I am short BTPs and long EUR.
BOE… 25bps expected, 50bps would be the more supportive result for cable. Very split as to what I expect them to do; on the one hand, recent progress in jobs data and headline inflation allow them to step down to 25bps again… On the other hand, they regained credibility with the 50bp hike in June… Despite the 50bp last time out, cable didn’t react as I expected - I would expect a 50bp hike to lift it above 1.3, especially with the market believing that the Fed is done.
50bp is unlikely… but not impossible. I don’t expect the BOE will discuss a pause like others have, but never say never with the BOE…
Single Stock & Index
To begin, let’s dive into my Tweet from Saturday about loading the boat on puts tomorrow and why I am