A shopping list for contrarians

Consolidasche

We have entered a bit of a boring consolidation phase here as stocks can’t decide whether to wait around for the retail buy flows in March or just head south now on further degrossing. USD shorts are loaded up but the USD false breaked two weeks ago and hasn’t traded weak since.

Bonds tried 4.0% and rejected it. The sell-pounds-on-dovish-BoE trade looked like it was going to work, but then 1.3500 held in cable. IGV is holding above the critical 76/78 level—but not bouncing much. Some key charts:

Consolidation

Meanwhile, stocks look like they are tracing out a giant distribution pattern after the triple top at 7,000 in S&P. Silver and gold are broken charts with blowoff tops, and so is copper. I am considering the possibility that the rotation out of electrons and into atoms may have climaxed. It’s a very, very well-known theme at this point. That doesn’t mean it won’t continue to be a big picture macro theme in the weeks and months that follow. But for now, there are signs that both narrative and price have peaked across multiple related narratives. 

The overriding themes, all of which are well-known and potentially priced in are:

1.     US dollar lower on policy uncertainty and foreign selling of U.S. assets / global diversification.

2.     EM stocks and currencies higher on diversification, carry, and value hunting.

3.     Metals higher on shortages due to AI capex, solar, etc.

4.     JGBs have bottomed as Takaichi policies are known and uncertainty is gone so lifers can come back.

5.     Crypto is dead because there is no narrative and retail ain’t coming back.

6.     SaaS is dead because Claude will rule the world.

7.     Capex is no longer rewarded because it stems buybacks and ends the FCF, capex-lite utopia for megatech.

8.     There is a generational shortage of RAM and prices will continue to go to the moon. Own the picks and shovels!

Contrarians: Choose your fighter.

I hate being the “it’s all priced in” guy because trends trend. But these themes are really jamming up my inbox this week and so my point here today is to simply suggest to you: Go through this list and find anything you disagree with. There is money to be made going the other way.

Say, for example, that RAM prices have peaked. Why? I don’t know. Maybe demand falls due to higher prices as per basic microeconomic supply/demand curves? I don’t know. Again, today is not about a call to action to short all the popular trades. There’s nothing going on so I am offering some food for thought. Take a look at DRAM prices. Could they have peaked? This would not be expected.

Then look at Sandisk (a designer and manufacturer of flash memory data storage) post-spinoff, for example.

And last night, Western Digital decided to hit the bid (this was not a huge surprise as they pre-announced it during earnings). Maybe the smart money is taking some profit?

Anyway, like I said. It’s a quiet day so I am offering a list of targets for all you contrarian hunters out there.

Currencies

Yes, it’s getting boring, but I still think EURJPY is going lower. Textbook bear flag inside the cloud. Above 183.55, my view is wrong.

The Anna Breman era started in New Zealand last night and it looks like the market got ahead of itself on kiwi rate hikes. While the statement and presser were not exactly raging dovish, the new governor of the RBNZ offered nary a crumb for the hawks. Bullish NZD dreams are on hold, yet again, as AUDNZD rallies to levels last seen around the start of Abenomics.

Final thoughts

1.     Druckenmiller bets on Brazil.

2.     Olympic gold medal count. Canada and Australia battling it out for 11^th place? C’mon, Team Canada!

I hope you make at least $200 today.