PPI is zzz

ZzZ

Not much sturm and very little drang after today’s PPI as the Core figure came in as expected and there is no meaningful read through to CPI or Core PCE. We are left to watch and wonder ahead of tomorrow’s CPI release. The market reaction was mildly interesting as there was an excuse here to sell USD on some of the weaker headline figures and revisions if you’re into that sort of thing and yet EURUSD did this.

I think part of the USD stability came from the circulation of this BofA report, which shows that consumers continue to spend for a third consecutive month. See chart at right.

USDCAD is just above my 1.3850 strike and I will try to get some gamma going ahead of tomorrow’s CPI by selling 30% of the notional from 1.3860 to 1.3890 between now and 8:29 a.m. tomorrow. I am encouraged by today’s price action, but obviously everything can change tomorrow. To 50bps or not to 50bps, that is the question, and we should have the answer tomorrow. Barring something silly, next week the FOMC will cut 25bps in a nod to falling labor demand and political pressure.

Remember in 1999, when companies would add .com to their company name and see their stock rally 65% or 200% or whatever? For an example, see article at right. The last line of that article is great: “The company has doubled in the last six months, making it a laggard.” Ha! Good times.

And here’s a study:

A Rose.com by Any Other Name (Cooper, Dimitrov, and Rau, 2001).

“We document a striking positive stock price reaction to the announcement of corporate name changes to Internet-related dotcom names. This "dotcom" effect produces cumulative abnormal returns on the order of 74 percent for the 10 days surrounding the announcement day.”

OK. And remember when Long Island Iced Tea and Kodak pivoted to the blockchain in 2017 and saw their stocks rally 200%? And remember the SPAC bubble in 2021 or the NFT bubble in 2022? Well, here we go again. Companies are now adding “Blockchain AI” or SOL or ETH to their business plan and watching their stock rally 300%.

Here's how far we have come in eight years (not very).

If you don’t follow this space, there has been an absolute explosion of these things in recent days (QMMM, AEHL, OCTO, etc. etc.) It is an absolute panic to announce these initiatives because it’s so transparently idiotic that everyone knows that everyone knows that this will never last. The stocks trade like altcoins after the announcement, then head slowly, surely, and asymptotically back towards their enterprise value, or lower.

There is not much to do about these because most are not shortable and obviously shorting them is impossible to risk manage in any meaningful size given the parabolic nature of the moves. And there’s no options market so you can’t sell call spreads. Normally, selling call spreads would be the best way to fade madness like this.

That said, the absolute maniacal issuance and rebranding activity could be a useful sign of the times. The Long Island Blockchain stupidity was the exact high in bitcoin (December 2017) and if this frenzy marks a major high for ETH and SOL I suppose it will look pretty obvious in hindsight.

There is infinite supply of these pivoters for now, and some of these pivots create new demand for crypto. Many of them simply allow OGs to offload onto noobs at inflated prices. And this is all procyclical. Just like they took GBTC to a 500% premium then a 50% discount, we will probably see the same story here. The endgame is visible in stocks like UPXI, ZOOZ, and CEPO. I doubt any of my readers are buying any of these stocks, but caveat emptor. If you want to be long bitcoin, just buy bitcoin. If you want to be levered long SOL, be levered long SOL. Cryptocurrencies are freely available to trade, you don’t need a goofy wrapper.

Final thoughts

There are so many imposter accounts on Twitter that I don’t bother reporting them anymore because it’s endless Wack-a-Mole. Normally, they do a decent job of making it look real. Like the one at right, for example:

But I have to give this one some credit for the stunning lack of effort.