Don't Fall Asleep On Your Bonds

1.) NVDA – I don’t like to discuss individual companies…that’s not what we do. But Nvidia, to some perhaps the most important company in the world…certainly the largest market cap at roughly $5.4 TRILLION…reports earnings tonight after the close. That market cap makes it larger than the entire stock market of every country in the world except the United States, China, and Japan. One company, nearly 17% of U.S. GDP. So, this is an exception given its size and influence on markets in general. The question now is, “Can something this big keep growing?” It’s important to recognize that Nvidia gets a front-row seat to where money is actually flowing across AI infrastructure, semiconductors, networking, software, power demand, data centers, and all the other stuff most of us pretend to understand. And right now, those are the most important areas of economic growth. Public filings released a few days ago revealed several stock positions Nvidia owns outright. Not partnerships or rumors, but actual equity stakes. There are a million reasons why a company would sell stock they own, but only one reason they buy it. According to the latest filings, Nvidia owns shares in Intel (INTC), CoreWeave (CRWV), Synopsys (SNPS), Coherent (COHR), Nokia (NOK), Nebius (NBIS), and Generate Biomedicines (GENB). These are not suggestions to go and buy…it’s not a lottery ticket for “secret” positions no one knows of yet. Is it a coincidence that Nvidia bought Intel and suddenly Intel stock is breaking out to new all-time highs for the first time in more than 25 years? That’s not random that Nvidia owns about $10 billion worth of Intel. What’s that mean? Simply that Nvidia probably understands where the demand is going better than almost anyone on Earth because they’re sitting in the middle of the entire ecosystem. These 13F filings are not a cheat code…they come out 45 days AFTER the quarter ends. By the time you’re reading them, we already know they’re incomplete. If a hedge fund manager is actively trading, there’s a decent chance the positions in the filing don’t even exist anymore. So don’t copy 13Fs. But Nvidia might be different in that regard. They aren’t shying away from the noise of the Fed, war, or inflation. They’re building and buying.

2.) BONDS – In a word… terrible for those who think they are safe. It doesn’t take much looking to see that bonds have not been a safe haven. They’ve been a terrible “buy and hold” for the static “60/40” crowd (60% stock / 40% bond auto-allocations). Everyone is talking about the bubble in AI, stocks, crypto, etc. But what if the biggest bubble of our lifetime isn't any of those? What if it's the one asset every pension fund, every retiree, every "safe" portfolio is loaded with? Bonds. 200 years of rate cycles say the same thing: Every peak lasts 56–67 years; the 1981 top was 14% yields; the 2020 bottom was 0%. What if 39 years of falling rates just ended? What if we're now at the start of the next 50-year cycle — upward? If the real “unwind” has just started, it will be more important than ever to be very tactical with your bond allocations and have a willingness to trade that asset class more actively. There’s money to be made with bond allocations… but probably not for a buy and hold investor. Most investors have never managed money in a rising rate world, so a systematic, active approach would be prudent.

3.) CTA – I’ve discussed the CTA crowd a fair amount in the past. They move a lot of money, so it pays to pay attention to their buying and selling estimates. Right now, based on estimates from Goldman, it suggests modest buying in all price paths over the next week and month, other than a month with a down market where the selling is large. A flat market is now expected to see +$1.9bn in buying over the next week, which is up from +$0.1bn last week and +$2.1bn over the next month. An up market (>2 standard deviations, so this would be a pretty big move higher) sees +$1.4bn in buying over the next week, which is up from an earlier estimate of -$0.4bn of selling and +$1.8bn of buying over the next month. A down market (more than -2.5 standard deviations, so this would be a big move lower) sees +$2.3bn in buying over the next week, but -$30.5bn of selling over the next month. Bottom line – over the next week…up, flat, down markets = buying, while over the next month…up, flat market = buying, down market = selling.