In partnership with
Don’t Let Tax Season Cost You Year-Round
That pit in your stomach is trying to tell you something: Waiting until spring is costing you peace of mind.
When tax season feels like a crisis, it’s usually because the right financial information isn’t organized ahead of time. Deductions, education expenses, and important documents all become a last-minute scramble.
Listen to your gut. You can start preparing now.
BELAY’s experienced tax prep professionals help you stay organized year-round, so tax season becomes simpler, less stressful, and actually manageable.
Start with BELAY’s free Personal Tax Prep Checklist and take the first step toward a smoother tax season.
Don’t spend another spring stressing over paperwork. Get help now and leave the pit in your stomach behind for good.
Good morning partner,
Few things to cover this morning:
Last Yesterday’s Session
Yesterday was a very clear bias on the auction, a repeat of the tug-of-war we’ve been experiencing all of the past quarter.
All technology and semiconductor mega-caps lost a good chunk of ground yesterday, dragging the overall S&P 500 index much lower even though most of the market actually went up.
Make no mistake, this is healthy and much needed after concentration levels reached a high of 50-60% for overall AI-related names.
As long as the rotation remains orderly, I think we can contain the S&P drawdowns at 15-20% from the highs for now.
If we begin to see a broader equity de-risking (only happened once this month), then I would consider a much broader selloff from the highs.
For now,
These repetitive rotational days, debunking some of the AI narrative’s excess, have been good for the Offside Portfolio as it posted a 2% gain yesterday while everyone lost their shirts.
Let’s take a look at last yesterday’s leaders and laggers:
Real Estate, Defensives, Healthcare.
My initial reaction to these leaders is that the market may be expecting some sort of inflation resurgence soon, especially as we’ll get PCE data on Thursday.
I say this because -on a risk off day - bidding these sectors requires a good amount of inflation, which boosts:
Home and rental prices (defensive)
Pass down costs for consumer conglomerates (defensive)
Premiums for health insurance and services (defensive)
While all other cyclical sectors, like technology, materials, and industrials all sold off.
This goes to show, anything that is currently AI-related will feel the heat on rotational days, which unfortunately is most of the market now.
I covered the entire mechanism behind the AI de-risking wave, and how it could end up for many of these companies.
Myth Busters
You know what an R^2 of 0.00 means?
It means there is a 0% relationship between two data sets, and Goldman Sachs decided to test the relationship between:
AI adoption among workplaces
Rising unemployment
Stories around AI are strong when you listen to the bull case, and I do believe eventually we’ll be in a world where technology is so advanced that it lets us automate mundane soul-killing tasks.
However,
The reality is, AI is merely becoming a productivity tool just like any other software.
That job disruption narrative is failing in real time, and the data shows it.
Which is why I think you should seriously consider Adobe’s Thesis as one of the most mispriced opportunities in software today.
News
SK Hynix falls out of the $1 trillion club after a few banks covered the story behind a topping memory market cycle, a thesis on oversupply that was given to you days before the big selloff came in.
Apple Seeks Government Approval to start buying CXMT chips and using them in their hardware products, beginning with Chinese-local iPhones first. A big hit for Intel, and more proof around our supply thesis.
NVIDIA Expands Financing for other entities with a new $750 billion acquisition round. I will cover the company’s earnings once they’re out, but know that last quarter over 56% of the balance sheet was made up of equity stakes in other companies, and 90% of capex was deployed to buying more stakes.
Pimco Bites the Dust as it is now getting into data center loan financing through the private markets. Michael Burry warns they may be using life insurance funds to expose everyday people into these loans (which are now collapsing.)
Movers & ES Levels
Tyson Foods 📈 Jumped nearly 6% after reporting that Mexican cattle imports will resume, helping a struggling industry with tight supply and rising prices for Americans. The first of many HALO real economy names to start turning.
D-Wave Quantum 📈 Spiked by over 20% as it announced an expanded partnership with AT&T to develop quantum computing capabilities, perhaps this is going to be the next growth wave once factor performance normalizes?
SpaceX 📉 Lost another 1.4% despite a successful rocket launch. Sadly, the company’s valuation had become more dependent on data centers and AI rather than space exploration, which is ironically the entire purpose of the company.
SanDisk 📉 Declined by over 11% on fears of the memory boom cycle topping and turning, the influx of supply and competition is weighing on the overly aggressive expectations embedded in the stock price.
Now let’s get into some ES levels for today.
$7,420 remains the wall as given to you yesterday, a range that captured over 100 points of gains in the futures market.
Enough to pay for over a year of Offside Premium by the way…
As we rammed through major areas like $7,500 and $7,450 I believe we will now settle in this current 50-point range between $7,450 - $7,400.
With the FOMC meeting tomorrow, and a very large trader betting that we will see a surprise 25bps hike from Warsh, I believe we may as well see the tape get to $7,473 - $7,480 where most of the aggressive sellers came in yesterday.
Essentially, that is the trap area that bulls want to tackle today and potentially ram through, which would get us back up to the $7,500 - $7,525 range again.
Most importantly though,
We have closed with a good amount of business getting done below $7,500 which is the cutoff point in this “P” shaped profile, the classic footprint of a reversal in markets.
There are tons of buyers trapped at $7,420 it seems, so that’s the area sellers want to hit hard today and the rest of the week.
If they fail, I am looking for a return to higher levels given.
Portfolio
Very large rally in our positions yesterday.
In fact, the average move was of 4.0% for most of our picks during a day when the AI darlings lost close to 10% on average.
Goes to show, the quality of our expectations investing framework pays the greatest risk/reward.
Speaking of R/R, I have given you the setup in the mid-caps rotation I’m currently watching, up next you will receive my curated watchlist for that asset class with individual deep dives to follow.
5.2% in less than a quarter, remaining over 50% cash to take advantage of future opportunities.
Here’s the positioning update for today’s premium members:
Subscribe to our premium content to read the rest.
Become a paying subscriber to get access to this post and other subscriber-only content.
Upgrade