An announcement, CPI, and the GOAT on equity concentration.
5 Thurloe Square in London, England is 6-feet wide at its narrowest point.
Apartments there go for 1m GBP +++
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28JUN expiry
455 QQQ puts $2.90
This marketplace is lit
Before we get started today, I’d like to mention big news in the institutional options trading market. SpectrAxe, a part of the Spectra Family of Companies (of which I am also a part) has launched the first ever all to all, anonymous, central limit order book style OTC FX option platform.
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You can read about it here:
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To find out more, please reach out to [email protected].
Consumer Price Index
CPI came in on the very low side with the unrounded Core CPI figure at 0.163. This is soft. Perfect symmetry in US 10-year yields.
The GOAT on Equity Concentration
You already know everything there is to know about CPI and FOMC, so here are a few nice charts from an excellent, balanced piece about US stock market concentration by one of the best writers and analysts in finance, Michael Mauboussin.
While it’s logical to worry about concentration, it’s also logical to have an open mind. While the tech behemoths are gaining ludicrous amounts of market cap, they are also earning way, way more money than any other companies, ever. There is persistence in which companies are the largest in the USA, but this persistence is not infinite. Times change, industries come and go in terms of prominence.
The USA is not at all special when it comes to equity market concentration.
Trees grow to the sky, but not the exosphere. The number one company in the US has been a terrible investment while the #2 and #3 stocks have done okay, depending on when you got in.
And finally, this chart is not from Mr. Mauboussin, it comes from Ed Butowsky. It’s a good explanation for a majority of the megatech outperformance.
Add in shrinking share counts, and you have a pretty reasonable explanation for the rise in concentration. That said, semis in particular are a highly cyclical industry and so NVDA is more suspect than, say, MSFT, which is a less cyclical, more diversified business. If I were betting which companies remain in the Top 3 five years from now, I would much rather take MSFT and leave NVDA.
Final Thoughts
My bearish equity view is now mentally marked to zero. Shorting the NASDAQ these days is like playing Level 3 Balloon Rage against a Level 15 Hog Cycle deck in Clash Royale. Difficult. Let’s see how things play out.
Note how before CPI, the Germany/France yield spread was tracking and/or leading EURUSD over the past two days. Outside of USD-centric days like today, this should continue to be a thing right into the vote on June 30. The spread shot higher around 9:00 a.m. NY yesterday and EURUSD bottomed at 11:00 a.m. Markets only focus on one theme at a time, so today is a USD day but next week we’ll be back to watching Europe.
This Ted Gioia piece on Universe 25 is one of the best things I have read in the past few years.
Have a skinny day.
5 Thurloe Square, London, is a bit of an optical illusion as the building expands into a triangle.
If you have 12 million quid lying around, you can buy this Thurloe Square apartment.
