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More Bullish Than Consensus!

Updated: Oct 31, 2023

Yes, it is very clear how concentrated alpha in markets is. It’s the best excuse for underperformance I guess.

If stock picking ever mattered it is now...Without FAANGMAT, “AI” Luxury and half a dozen other mega caps, (Ferrari and Ozempic! (Novo Nordisk etc) you are wallowing in underperformance vs the Passive crowd.

The irony remains that the net buyer of Equities has to be more attracted to Mega-cap

stocks as their index weight goes up so the big get better. It is also clear who the buyers are.

The backdrop I see is still hope that the drumbeat for a kind of negotiated settlement in Ukraine can get louder. Energy and Agriculture and Defence all trading like this is


Then there is “the rates conundrum”: simplistically if the Fed pauses, the market would celebrate but central banks would not be able to finish the job. At the same time, it cannot keep hiking and see the system break. A World of 3’s is good for risk assets.

MM reminds me 'The World is now already cutting rates: in H2 2023 & 2024 he already models 25 Central Banks cutting Rates with emerging markets leading: Brazil (June 21st), Chile (June 19th), Czech Republic (June 21st), Colombia (June 30th), Hungary (May 23rd), Mexico (May 18th) and Peru (June 9th).

What Nutstuff sees in markets is indecision and indexes in the last month going nowhere fast. Five weeks ago the S&P 500 closed at 4,137. Today it stands at 4,124. (See chart above).

Even the “awful” YTD small cap Russell index is flat Month on month. Meanwhile everyone has a view on the debt ceiling so it isnt really an unknown unknown. So honestly I doubt a March ‘20 -10% reaction.

I DO see some cracks in the “no downturn” argument. Home Depot/HD US numbers were dire. I have reduced consumer exposure a lot already. Benign Volatility also intrigues but again not my specialty.

On specifics, I am watching the CRB Raw Industrials commodity index just 40bps off a new two year low. With Apple, Microsoft, Alphabet, Amazon and Nvidia new rel highs. If you missed them ... ouch!

So, whats the value add call here?! Nutstuff is much more bullish than consensus. As below

Japan/Nikkei is through 30k! And I see higher not lower moves and hope for a broadening of performance.

If I am wrong then buy Gold, “Protection” on Nasdaq and Eu Luxury mega-caps and take

the Summer off! Gary Paulin who when I worked with him, taught me so much in the common sense approaches to equity market thematics and portfolio alpha, reminded me this week that, NO, the world really doesn’t need another dog-walking app, but it’s certainly desperate for plumbers and spot-welders (in the nuclear industry is a huge emerging bottleneck!)

Also think about the vast majority of the Developed world’s corporate wealth being in intangibles (such as goodwill, brand value, IP, etc.) Ask yourself, can that increase in a world where artificial intelligence (AI) starts to erode the value of human intelligence?

Further can it where securing national interests, be that domestic supply chains or minerals for energy transition, simply drives up demand, inflation and interest rate volatility, in turn lowering terminal values of long duration essentially “promises”?

Again to consider how markets price this: A reminder of this great statistic (originally from Kiril @13D) and is still thought provoking: with Apple’s market capitalisation (now even higher!) you can buy the world’s 50 most valuable mining companies, as well as the next 50 and have enough left over to snap up three years of global copper production and all

seaborne iron ore.

Then consider that the top 10 miners alone will generate more free cash flow on a

combined basis in the next 12 months than Apple and trade on about one-third of its cash flow: an average of 9x versus 25x. (Bloomberg).

You could also buy the IBOV (Brazil) 4x over. Yes, having an intimate connection to more than 1 billion of the world’s richest consumers like Apple certainly remains an enviable business model, but the other side of that trade could look equally attractive (ex oil).

From here, XOM/Exxon vs APPLE is a consideration for “alpha” from here. I also would flag what I see as someone smart described as “Peak fear” in coal names right now; Peabody/BTU US, ARCH US, WHC US and CEIX US.

I agree with Druckenmiller on Copper and I also still like my China exposure in Casinos LVS or WYNN and also with AliBaba, where I still see the re-rating coming.

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To Nutstuff again this is a giant and very serious game of WHACK-A-MOLE, as the UK continues to take action against economic threats: First against Global; Mountain 1: commodity price inflation and n

Duck hunting without a saxophone!

What we are seeing clearly now is the US trying hard to goad China in Taiwan, a diversionary tactic or a new game to play from the Washington bunkers. I suspect Xi plays the calm and longer game here.

Multipolar word = BRICS +2

Discuss: “The days of the Central banks saving the stock market are now over. They can’t raise raise rates or they risk contagion among banks. If they cut rates inflation will surge again. Did they t


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