Good morning,
I have taken a few weeks off from writing. August is up there with Christmas time when it comes to the noise to signal ratio, while there has been plenty of action in names I own - index has pretty much done nothing since the first week of August. That should now change with Jackson Hole having happened, which is my green flag that summer is coming to an end. I have never seen much point in creating a market view just because another post is due on here. I am not here to give people their dopamine fix, sometimes there is nothing useful to add and the correct trade is simply to do nothing but sit on your hands. Yes, in a world full of grift, there will always be someone willing to fill the silence with another urgent chart or trade. Pretending there is always something to do may well be great for engagement, but I am not so sure it is for portfolio management.
I don’t plan on writing a post about Jackson Hole, having watched it, I still think most of it was noise, as I did before the event. He was hawkish, trying to make out that September will be a “live” meeting (rates will stay where they are) with a smack in the face for gold and ten year +4bps, with short term rates moving even more aggressively. The speech will be forgotten come the next NFP print, so not a lot more to comment on.
What has changed, and is worth discussing, is my Phase 3 basket. Back in March I launched this basket. I’ve written about it plenty of times but for those that don’t know… it’s a 15 name software basket which at the time was probably the most hated area of the market - AI would destroy software seats, make code abundant and leave the application layer looking like a bunch of expensive subscription dinosaurs. When I last wrote about the basket, it was up 36% with 14/15 names higher. As of yesterday’s close, it is now up 47% since inception. It’s been a great trade, and was published and fully sized when consensus was calling for the death of software but the performance is not the reason I am writing. I am writing about it again because the evidence is getting stronger and the language around software has been changing quickly. When I put the basket on the opportunity was price, today prices are higher but so is the probability that the thesis is right. I have not increased the position from its original 20% allocation yet, but I am seriously considering it and that’s what I will write a lot on in this post.
