Chips Ahoy!

Get your coffee and open your portfolios, hug your families close this week because come Wednesday afternoon we have Nvidia Q4’ earnings and it’s sure shaping up to be one hell of a fireworks display. Happy Presidents Day to those who celebrated with a day off yesterday courtesy of work. Before we open up our Lootbag let’s remember there are plenty of sympathies to play for Nvidia earnings, semiconductor names like Arm Holdings ($ARM), Super Micro Computer ($SMCI), Advanced Micro Devices ($AMD), an honorary mention to Intel ($INTC) but who cares. There’s also the lithography players like ASML, and AMAT. Don’t pay the premium on the Nvidia options chain you’re just paying the market makers.. as a great Hugh Hendry once said “Don’t be a hero, you’re gonna be a zero”

💡 Bullish Babble: Decoding Wall Street’s Lingo

Last week we had a somewhat high CPI print and it finally shook up the market just a tad bit. It ended up causing what looks like to be our second red week of the year after the cliff dive close on Friday. The market wanted the 2 handle on the Y/Y number to regain any momentum that it had previous to Fed officials essentially pushing March off the table for rate cuts. After CPI printed on Tuesday morning premarket we saw the rate cut odds for March fall on the CME Fed Watch Tool fall to 5% odds for March and now the sentiment on a May rate cut seems to be pretty weary as well — currently sitting at 32%.

It looked like the flood gates had opened last week to go under 500 on the overall index but it was none other than Chicago Fed official Austin Goolsbee who had some pretty bullish remarks at the Council on Foreign Relations when asked about the inflation rate and the Fed’s targets.

He then went on to say

Funny he should say that as that Wednesday following the CPI report the day before is when the market regained the “CPI candle” and started to make it’s way back to the highs of the week only to get rejected around 503.30 which near the highs of the week we set on Monday. All in all it seemed like a well deserved reaction for the markets to go down on a early celebration for inflation but it seems like one way or another someone can say a few kind words and twist the data to be bullish. Seems like Fed Goolsbee is bullish and that’s not new to anybody - if you’re following along at home he’s always been one of the dovish ones. He’s also kind of leaning towards the side of 2% being a goal but not a set in stone target by the way he talks about all of this — I talked about this 2% inflation target in one of my original volumes of this newsletter check it out here

🧠 Bigger Ideas

Market breadth is one thing and market volume is another thing. There’s a lot of chatter going around X this past weekend about how the mag 7 are accounting for much of this year’s gain in the overall indices and that may be true. The sheer size of these companies now is just so large and with Nvidia now being 4% of the weighting of SPY it’s safe to say that AI is moving the markets but we’ll get to that. I want to bring this chart to the attention of my readers there’s a nice handful of you now and I appreciate that so I try to bring the best charts that I find to you guys. This one is pretty eye opening. Just like the markets up and to the right — the cash on the sidelines is also just not stopping. Imagine that liquidity and that volume that comes to the market, when it comes you’ll know it.

This is cash sitting in high yield savings, money in CDs, government treasury bills. This is the next rally brewing. When I see this I just see people waiting and being patient with their cash. I don’t necessarily see fear or a disdain from the equity markets I just see investors picking and choosing when to deploy their money. Right now it seems like there is a lot of money sitting on the sidelines that just does not want in, maybe it means there is an impending doom coming, or maybe it just means that the market is starting to get a little frothy…

📊 The Data Disco

BofA’s financial stress indicator has fallen now to the lowest level since 2021 and soon after it will be at pre pandemic levels, I think pair that with the chart from above and investors are feeling at ease, maybe too much ease let’s hope we don’t get smacked by any geopolitical events or bank credit events soon? Maybe let’s play alongside big money and let the markets play out for some time and see where the tides take us.

🧠 Stocks Unboxed

Data provided by Quartr: Try Quartr Core for 7 days for free here + use code ‘LOOTBAG20’ for 20% off a Quartr Core subscription!

“How do you know this ticker? What company is that? That’s what Stocks Unboxed is for. Every week we’re gonna go through and briefly overview a random company, its recent performance and anything regarding the company that could be viewed as a good first step to starting to dive deeper into unbox Robinhood Markets ($HOOD). Robinhood Markets, Inc. operates a financial services platform in the United States. Its platform allows users to invest in stocks, exchange-traded funds (ETFs), options, gold, and cryptocurrencies. It’s competitors are all of the legacy names in wealth management you’ve heard of ($FIS) Fidelity, ($TROW) T. Rowe Price and many other investment banking partners. I and many others like to think of Robinhood earnings and cash flow generation as a sign of market and retail sentiment so it’s always good to go over their business health.

🖼️ The Chart Gallery

Charting tools and comprehensive financial data analysis from Koyfin - use link provided to receive 15% off Koyfin Plus

Sometimes it pays to step back and take a look at the picture full frame and see that there are some abnormalities in the markets. SMCI was one of them and SMCI is still one of them. Let’s just candidly put aside the fact that these names are up 20%, 40%, some even 70% YTD but this super duper itty bitty micro computer sitting at a 56 billion market cap should not be where it is at at a WHOPPING 182% YTD. Do with that what you must. No data this week really all eyes on Nvidia. Godspeed