A Nuclear Resurgence… [Dirty Dozen]
Good trading is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake. You need to believe in something, but at the same time, you are going to be wrong a considerable number of times. The balance between confidence and humility is best learned through extensive experience and mistakes. ~ Michael Steinhardt
In this week’s Dirty Dozen [CHART PACK], we cover better-than-consensus earnings, near-record cheap energy valuations, short-term bullish market stats, bearish econ data, and run through the nuclear bull thesis, plus more…
- Q123’ earnings came in better than the market expected. GS writes “margins in every sector surprised to the upside .. we believe the worst of the 2023 negative earnings revision cycle is now behind us.” (h/t @carlquintanilla)
- Despite the energy sector’s run over the past 2+ years it still trades at one of its steepest discounts to the market in over 30 years (chart via GS).
- Last week we mentioned the dangers of shorting a dull market such as this. Well, here are the actual stats from veteran technician @WayneWhaley1136 who tweeted:
“Don't Sell a Dull Market Short. The S&P failed to post a 0.5% daily move last wk. The below case set is based on a detailed price pattern match routine which scans for the price patterns in the past 30 yrs which most closely resemble the current time periods price pattern.”
- We at MO continue to believe that the economy is set to begin materially slowing in the later part of this year due to a host of inbound factors. There are a number of leads that are starting to support this as well. @FreightAlley, who tracks proprietary high-frequency freight data, shared this last week.
“The worst trucking market prior to the current one was in 2019, the "Trucking Bloodbath." At one point, 10 large trucking companies filed for bankruptcy in a single week.
“New England Motor Freight (NEMF)'s bankruptcy opened the year (3000 employees) and Celadon (5500 employees) ended it. There were hundreds in between.
“The current trucking spot rate is below the 2019 seasonal equivalent. While this alone is bad, the worst news is that operating costs for trucking companies (not including fuel) are up more than $.30/mile in that same period.
“On a cash flow-adjusted basis, spot rates are down to $1.19/mile & this does NOT include any increases in the cost of capital to finance operations.”
- BofA published a report recently updating their uranium bull thesis (a sentiment we strongly share). They write “Two short-term bullish catalysts to watch: 1) G7 countries could impose sanctions on Russian uranium; 2) leaders may embrace nuclear as Net Zero deadlines loom. After all, nuclear is the cheapest clean alternative on a full-system “all in” basis… Nuclear power also returns 75x its initial energy investment vs. 28x for gas and 2x for solar.”
- The third uranium bull still has a long way to go… (chart via BofA)
- They argue that war and high energy prices will help drive a nuclear buildout (chart via BofA).
- And some numbers… (via BofA).
- We hold a position in the TSX-traded Sprott Physical Uranium Trust (the chart below is a weekly).
- Turkey (TUR) was one of the best-performing markets in 22’, rising over 100% in less than 6 months' time, and has traded in a sideways range since the start of the year. President Erdogan is facing his first real challenger for the top job. As I write this it looks like the vote will go to a second round where Erdogan will have an advantage.
- I keep saying this but USDCNH needs to be watched. It has all the conditions set up for a big run. We are long and will add to the position if given technical points to do so.
- Everything though comes back to this chart, bonds (TLT). Our leads slightly favor a breakout to the upside (yields down), but we need to see more divergence from them to have a real signal. And, of course, with the debt ceiling drama intensifying and a lot of unknowns around how that will unfold, this chart can go either way.
Thanks for reading.Stay frosty and keep your head on a swivel.
