They also have a significant % of stores in Washington DC; where DOGE is hitting federal employees hard w layoffs

Seems like $CRWV IPO won’t see a pop, underwriters trying to hold the line @ $39 but book is too heavy. Very telling of investors’ sentiments towards AI infrastructure. Let’s see if $NVDA sees sentiment contagion from this IPO given the significant linkage between the 2 cos

I think we are at 60% of experiencing a growth scare. ~75% pr is the point of no return, where if we cross that, probability of getting a growth scare accelerates due to the expectations trap (consumer expectations of a recession further reinforces the likelihood of a recession due to reduced spending).

IMO, we will likely get a growth scare sometime, and maybe even a stagflation scare (see pic above).

While I don’t think trump will let it transition into an actual economical recession, but as markets are forward looking, there is money to be made being long recession/stagflation probability now (for the next ~3-6 months) and then shorting that same basket when recession probability are at peak (~6-12 months).

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In the near term tho, with the frequent back and forth from Trump admin (oh there’s tariffs, oh wait there isn’t, oh wait there actually will be tariffs), market is also starting to believe his words less, and instead starting to price in the effect of prolonged uncertainty. Case in point: no significant sustained bounces during his numerous walk backs last week.

Base case now is he’s front running the pain, but will start pushing for green markets again a few months before US midterms.

Good news is based on how “bad” or “good” liberation day is vs market expectations, will inform us on how serious Trump is; which will help greatly in navigating the markets over the next 6 months. Bad news is midterms is in Nov26; so there’s still some time for him to sink the markets — and the more he sinks it from “inheriting a Biden economy”, the more he can claim to resuscitate it.

Hence our bearish view for the short term. While we might make tactical trades around key catalysts to manage risks, such as possibly closing some shorts on Monday before “liberation day” on Apr 2, we remain structurally bearish, as incentives of all forces (Trump admin, Fed) is in pushing equity prices lower in the short term. Gonna occam razor this.

Also to note, as this short trade moves from being essentially “long # of times Trump goes on TV to yap” to “long recession probability”, I feel more comfy in holding shorts for longer periods, as a growth scare will see more sustained downtrends and are likely less volatile in nature, vs tariff talks which may see walk backs.

Trade idea: SHORT 85th - 97th Percentile Wealth Spending.

Key drivers: 1) feedback loop between equity prices and spending, 2) AI displacement of white collar jobs

Short: $CAVA $CMG $SBUX $LULU $IBKR $BMW $EL
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As explained in the Ouroboros thread, the American economy consists of 2 parallel economies (driven by income inequality), with divergent realities and spending habits. Chart related below. This impending recession scare will likely impact high-income earners/wealthy people more — due to the feedback loop between their exposure to the stock market <> equity prices. This group is also responsible for a disproportionate amount of spending in U.S.

There is also another tailwind for this idea not previously explained here. AI displacement. It is my base case that the incoming AI displacement is underpriced by the market. I’ve been thinking for the longest time that we will see extreme waves of layoffs that may result even in societal chaos — and I don’t think many really understand the true extent of this incoming AI <> humans displacement trend. I have also been scratching my head on how to express this view accurately in the market.

I think this trade idea is a good way to do so. Basically, I think the white collar jobs are more at risk for AI displacement, vs the blue collar jobs.

By being short 85th - 97th Percentile, we are basically short the spending power of these white collar earners. Notice we are not shorting the top 98th percentile through ideas like RACE US, as I think the billionaires’ spending won’t be even slightly impaired by a recession.

I’m starting out by building a short basket consisting of mostly consumer names first as these are the easiest for the market to understand wrt lower high-income spending, and thus easiest for us to get paid. Will branch out to other names over time

Related links:
https://salesforcedevops.net/index.php/2025/02/28/the-white-collar-recession-of-2025/#:~:text=Because%20AI%20tools%2C%20which%20rapidly,legal%20tasks%20becomes%20increasingly%20unnecessary

Not adding much gross short exposure for this trade, but instead shifting most of my $FIVE short to this basket.

While I still dislike $FIVE business model, I think low-income companies are “relatively” sheltered in this recession, as their customers have already been squeezed hard LTM, and valuation is already at trough levels (see $DLTR). $FIVE is also back at pre-print levels, so feels better in taking the win here.

Trimmed some $NVDA short @ $105.5 for a small ~4%.

Also longed some $HOOD @ $41 to bring down net short exposure — mainly to manage risk as I don’t want to be caught offside by short squeezes going into Liberation Day, like the previous time.

As expected we are seeing some squeezing today. Net L/S portfolio should still be green today.

I’m concerned on why the market is squeezing up before the event day. In fact I would be even more bullish for post-liberation day if the market was dumping the day before event day. This all seems to me as the market getting ahead of itself thinking tariffs won’t be as bad, another sign that the market still thinks that Trump 2.0 is same as the Trump 1.0, and still does not believe in the sincerity of his words.

I’d fade personally, adding back shorts on $NVDA @ $109 $CAVA @ $87.68 $LULU @ $282.

Let’s see; hopefully we are not liberated from our monies tmr.

Not completely hedged as portfolio still susceptible to momo driven reversal, given shorts on high momo names like $PLTR $TSLA $NVDA. Momo shorts only hedged by the $HOOD long (a momo stock too).

But given my bearish bias, I think it’s fine. Willing to take a little risk here and will cut momo shorts quickly if incremental info proves me wrong.

https://x.com/bobeunlimited/status/1907377416286122417?s=46

Pretty good thread; my view aligns w it

10% flat on all countries
20% on EU
34% on China
>20% for major allies

30Y US Yield falls to 4.5%

First glance, market likely worried about trade war spurring a recession. Flat rate lower than expectations, but China is surprisingly high. EU & allies may cave to a certain extent, but China.. maybe not.

Will have to see move from China & major allies/trading partners next, but what’s impt is that this creates another short catalyst (China & Other’s retaliation) rather than making Liberation Day a clearing event for uncertainty.. staying bearish for now. Revisit in the AM

$LULU down -7% on this news also affirms trade war with China/major trading partners, and recession worries are the main focuses of this announcement.

$BABA getting hit -5% as most direct line of sight for US investors, but I think market’s got this wrong so will remain long on the name.

Taiwan 32%

U.S. fabless players gonna be hit like Pearl Harbour

Post Mortem:

1) The most striking thing about this, was that Trump admin knew what it was going to do to markets; and still did it anyway. That alone should inform us on Trump 2.0 != Trump 1.0, not what the market had hoped.

2) Tariffs, if implemented as they were announced, would definitely result in a global recession. SPX only closed -2.7% yesterday (which I believe does not capture the full magnitude); another sign that the markets are still in denial hoping for sense to prevail.

3) The uncertainty of these on-and-off tariffs make it almost impossible to run a business and make long-term plans for growth, which in itself creates a feedback loop of cutting investments and drives a recession. To off-shore from China, many companies incl. $LULU shifted supply chains to Vietnam. Trump then hit VN w a 46% tariff. 46% cost increase for T-shirts -- either margins compress by almost half, or you pass it on to the consumers.

I think the portfolio did relatively ok due to the short hedges, but could be much better obv. given our bearish view from the start. I would still stick w my long/short choices. Live and learn! May take off some longs tonight in light of these tariffs.

Also to note, the U.S. 30Y is finally starting to cave. This has been one of the stated objectives of the Trump admin since the very start. The market is finally, tho slowly, starting to believe in Trump 2.0’s words, and an increased probability of a recession.

Seems there’s a carve out for semis. Fabless safe for now

https://youtu.be/3y7XwBcdg_0

Good watch

The aspect I like most about markets is that at its rawest essence, it’s just a collective of human participants, and hence psychology. Human psychology never really deviates, all throughout history. Hence, using history to think about the future is a good hack in navigating markets.