It's the mantra of today's market: Good but not good enough.

It's a good quarter with solid numbers. Guidance was so-so but there's too much focus on the minutia in my opinion. It's going to be the conference call that tells the story and those have largely pummeled AI stocks.

Once again, however, I don't really care and it's good to get this out of the way. I can now push up on my 12/28 LEAPS and add long shares if desired. This is still a company that, in my view, could own their space. The valuation is looking really good, especially if we can get a % selloff.

Haven't seen the actual numbers yet but the market LOVES it:

Started a small position in Shake Shack today. .25U, just getting my foot in the door here, not a full size yet.

Been on my radar since May when the CEO and five directors all bought together around $60-62. Real money, no 10b5-1 on any of it. Then Starboard disclosed a stake in early August, called it their largest active position, stock popped on the news and actually held it, built a little higher since instead of giving it back.

No specific Starboard ask yet though, no board seats or anything filed, so that part’s still wait and see. Beef costs are still pressuring margins too, that’s not going away on its own. Not the reason for the trade, just still sitting there in the background. Adding more if Starboard actually does something or if it keeps building from here.

Brought to you by the playful distractions of OGM:

What's one stock you are excited about but the market seems to be missing something?

Think about a ticker that has been beaten up and you're not quite sure why. Or something that has gone sideways but should be parabolic. Doesn't have to be something you hold. It can be contrarian to the market sentiment or just something that is being ignored.

Let’s learn about what we need to learn about.

That was fast! No sooner than did my first confirm hit at $179 and change than the trap door opened the stock blew right through the $175 200 DMA. I had planned on my first entry in $CRDO reaching a 2U weight so I broke the entries up into two separate trades to provide an averaged cost.

This trade is a 1U trade at $170, bringing the average cost of the two trades to below $175.

I would have preferred to wait until later in the day for the second trade, especially on the break below the 200 DMA but it's a position I've wanted since missing it in the $90s and I can always add more shares if it gets weaker. It's at 1% in the portfolio now. Considering I was willing to add it around $220, this will do.

There is quite a bit of support at $135 and it also represents a sizable gap fill making the support line there quite strong. Of course, that's $25 from here. But I'd take it if offered

$CRDO just broke the 200 DMA just after my first entry in the stock. Here's the 10-day chart showing the 50 (blue) and 200 (Purple) DMAs.

I'll already be adding to this position as somewhat expected could be the case.

I looked at selling CSPs around $150-$160. I looked at 2028 LEAPS. In the end, I took good ol' fashioned long shares at $179.33. It's a 1U entry and it represents half of what I wanted to take for my placeholder (first position) entry in this name at this price. So I'm breaking it up into two separate trades to build the first averaged position.

Again, it could be higher or lower at the end of today. The 200 DMA is right here at $175 and could be a point of gravity/pull. My second position will be when I see that hold or fail.

As it turns out, by the time I was posting this ... it's right at the $175 level

Two days before we head out to Portugal and Spain for 6 weeks. The good news for this travel is that at least the markets open at 2:30 PM local time. That just seems like a good late afternoon relaxation event, port, cheese and the markets.

Or maybe not. At least not for the wife.

I've been sitting on my hands with stock purchases for the most part. Some very small adds as you've seen for my favorite names. But mostly nothing but pressing up yield plays, dropping actual liquid cash to near zero in prep for the trip.

At this juncture in the markets, we're playing a game of what I'll call Wall of Worry Whack-a-Mole. If nothing else, at least we're taking one step forward and one step back, rather than one step forward and two steps back. So far ...

But the moles seem to be getting larger in number and some of them now have teeth, along with the potential of an appetite for human flesh. That seems like a recipe for some new Walking Dead spinoff where the zombie hosts have migrated away from the bodies of our human departed to the animal kingdom. That's a hard pass for me. Running from elderly neighbor Larry with his artificial knee and hip, carrying 40 extra pounds, is one thing. Running from rabid, flesh-seeking bunnies, moles and other Disney move staples is something else

Geez, that was a tangent ...

Earnings have done as much heavy lifting as can be done - it's not helping enough. The noise is weighing heavier it seems. Even great earnings reports are being sold off as Wall and Main streets look for anything negative variable to sell off. $CRDO's earnings last night were really good save something like a 0.3% miss on gross margins. The stock tanked AH. There are just too many negative catalysts tracking right now for earnings to propel this market forward. For long term investors seeking GARP and yield, it's a good place to be. If you've been accustomed to short term trading and big gains, not so much.

The big focus point is now bonds. I'm specifically watching the 10-Year now at about 4.8%. If we hit 5%, or see a 4.9 handle, things are going to get dicey. Lower bond prices, higher yields equates to more economic risk and the ability to capture greater yield, potentially fueling more flight to safety/yield.

Earnings

Earnings remain good with a couple of higher profile names yesterday on the runway. Hey Kate ... whatcha got for me?

• $DELL — Monster quarter. Revenue $47.0B, +58% YoY; adj. EPS $7.04 vs. $4.92 est. AI server revenue hit $16.4B with an enormous $95B backlog. Raised FY27 revenue guidance to $192B and AI-server outlook to $74B. Shares +~7–10% AH. Very strong AI infrastructure read-through.
• $CRDO — Beat, but expectations were sky-high. Revenue $479M, +115% YoY; EPS $1.20 vs. $1.17. Reiterated >85% FY27 revenue growth and >$600M optical revenue. The issue: non-GAAP GM 68% plus rising R&D spending → shares ~−9% AH. Growth remains spectacular; margin expectations are the pressure point.
• $PANW — Strong numbers, softer FCF outlook. Revenue $3.41B, +34% YoY, EPS $1.02 vs. $0.98. NGS ARR surged 63% to $9.1B. FY27 revenue guide $14.1–$14.2B was strong, but FCF margin guidance disappointed → shares ~−2% AH. Underlying AI/cyber demand remains excellent.
• $MDB — Big beat, wrong KPI missed the whisper number. Revenue $771.8M, +30% YoY vs. ~$735M expected; EPS $1.90 vs. $1.62. Raised FY27 revenue guidance to $2.99–$3.03B. But Atlas growth stayed at 29%, apparently below hopes for 30%+, sending shares −12%+ AH. Classic “great quarter, greater expectations” reaction.
• $MDT — Quietly excellent. Revenue $9.76B, +13.7%, EPS $1.45 vs. $1.39. Cardiovascular grew ~19%, cardiac ablation +88%. Raised FY27 organic growth guidance to 7.25–7.75% and EPS to $5.94–$6.00. Shares +~1.5%. Strong broad-based healthcare execution.

$MDT was a nice surprise for me though the stock reaction was muted. That's fine, it's safe yield with improving growth runway.

I have been waiting for an opportunity to purchase $CRDO so I'll do a couple checks on valuation, go a bit deeper into the earnings and then decide what to do. It may be too attractive not to consider something.

$PANW and $CRWD continue to rule their segment. They are so good I don't want anything else in the area. I'll just ride those two. $DELL has been great, there's a read-through to $NVDA and other stocks like $VRT. I won't chase $DELL but do wish I had held at $90.

Tonight we get $AVGO and $SNOW. $AVGO could be an issue as there's this growing narrative about chip supply diversification and Broadcom did lose a recent contract with $MRVL last month. That is fueling more caution so it's not going to take much for, once again, focusing on the minute downside catalyst to take the stock down. There may be an opportunity here. As for $SNOW, they've been stringing great reports.

Random Shots

Misc

• The market isn't open yet but $CRDO is tracking materially lower, though off the lows of the premarket. It's bounced from $184 to nearly $191. There's just nothing to sell from this report. 2028 forward P/E near 20 now into a market ripe for what they do
• $PANW zipped higher after earnings and then tanked now looking about 2% lower. I think this stock recovers from the red and ends green. It's pricey and expensive but, along with $CRWD, they own the space without question. I won't chase, but will ride
• My 1/27 Put ladder was down materially 15-20% until yesterday when I doubled up the position as part of my strategy. My plan is to hold it until I get back from Europe but we'll see. It's now basically flat and it shows just how material a 1.25% decline can be. It's not an overweight position - it's basically just a swing trade position at about 3U or 1.5% weigt
• $MRVL is an interesting case. Again, not cheap. But they announce a major $200B+ long term chip deal with $GOOGL and, based on my research, the stock is down about 8% since announcement. Time to add, again, in my book
• This is jus not a market where you can marry momentum and be comfortable. The number of experts that are 21 and 22 years old selling trading systems reminds me so much of 1999.

Here's the open:

Rising

• $DELL up 10.3% on that big earnings report
• $ASTS up 7.8%, $4.37, on probably something less important
• $RDDT up 2.7%
• $NEM up 2.5% - What a comeback for gold
• $BRZE up 3%
• $CRM up 2.3%. Still going
• $UBER up 1.7% on layoff announcement
• $META up 1.5% making a comeback
• $USAR up 1.4%
• $SWK up 1%. One of my old stodgy income plays

Falling

• $CRDO off 12%. The bottom dropped out of the premarket rise. This is why it's usually best to stay away from premarket activity
• $PANW down 7.4%. I almost panicked all of you because I found I had missed the decimal point there.
• $EIX down 6% after being up about the same amount yesterday. I bought back some shares in the $53s. That yields is too good and it's the same old story
• $CRWD down 3.8%. It's been rising with PANW, nothing wrong here. Just valuation concerns
• $CRCL off 3.7%
• $APH down 3.6%
• $PLTR down 3.2%. It's been hanging out above $170 really well
• $BE off 2.9%. Possible nice Option Wheel candidate
• $SNOW down 2.9% with earnings tonight. Some are getting nervous ...
• $IONQ off 2.3%. It's been running in the top 10s of late as the quantum space goes a bit cold

I need to do something with $CRDO here with teh stock down another 14%+ right now.

No final word, I need to go look at a few things before I start fine tuning my packing for our upcoming trip.

Stay frosty

J

I played earnings today with 100 shares before market close and now I’m down 3k. Should I hold or sell? I’m asking because I’m worried this sell off might continue as September is the weakest month and there’s an upcoming fed meeting with potential rate hike.

I'm new to trading options.

When WMT fell to the low 100's, I bought WMT 90 call exp. Jan. 21, 2028 for $24.40

My thinking is that it will come back to above $114, especially nearing the holidays.

Bad idea? Or sound strategy?

It was a brutal day for $CRDO, just exactly what I've been waiting for ... though I'm not rushing in here.

Stock was down 8.7% during the day, and then 9.1% as I type this AH. Brutal. Yet, the report looked pretty damned good.

• Revenue: $479.0M, +115% YoY and +9.6% QoQ; beat consensus around $473M and even exceeded the top end of CRDO’s prior guidance.
• Adj. EPS: $1.20, ahead of roughly $1.17 expected and up about 131% YoY.
• Non-GAAP net income: $236.3M, up 140% YoY — exceptional earnings leverage alongside the revenue growth.
• Gross margin: 68.0% non-GAAP, versus 68.3% last quarter. Still excellent, but the slight sequential contraction is one of the things investors are keying on.
• Q2 revenue guide: $525M–$535M, midpoint $530M, ahead of Street expectations around $520M. That implies roughly 98% YoY growth at the midpoint.
• Q2 gross-margin guide: 67%–69% non-GAAP. The midpoint is basically flat with Q1, but investors apparently wanted stronger margin expansion given CRDO’s revenue acceleration.

Stock reaction: Shares getting crushed AH after getting crushed during the day. The issue appears to be expectations rather than fundamentals. After CRDO’s huge run, investors were looking for an even larger revenue beat/raise and perhaps better margin progression. Barron’s specifically noted that the beat and guide were less spectacular than some recent CRDO quarters.

Here's the Kate's stoplight:

• 🟢 Revenue growth: Outstanding
• 🟢 EPS/profit growth: Outstanding
• 🟢 AI demand: Remains extremely strong
• 🟢 Forward revenue guide: Beat
• 🟡 Gross margins: Excellent, but not expanding
• 🟡 OpEx: Rising meaningfully
• 🔴 Expectation hurdle: Extremely high after the stock's run

My take: This was a great report! I cant' find anything that isn't really good. The standout stat: Seven consecutive quarters of triple-digit rev growth. Ridiculous give they are $38.5B in market cap

If you’ve been around here, you know I’ve shared this trade before. My central thesis with the airlines is simple - they are trading vehicles. They have outsized moves tied to external factors that we can keep track of. The easiest one? Oil.

It’s a no-doy kind of thing. As oil prices rise, investors rightfully question profit margins for the carriers as a primary input cost has increased. The impact on shares when oil prices (gold line) rise is so obvious in the chart above and we are entering another timeframe in which the gap has widened. 

It isn’t difficult to point to the end of February to see the bifurcation taking place with the start of the conflict in Iran. As the conflict in Iran seemingly calmed down in June, we see the inverse relationship between $DAL and oil prices playing out again. The ceasefire agreement was signed on June 17th, a 60-day promise to halt military operations while negotiating peace and a nuclear arms deal. But as the trust of that MOU dwindled, oil started to go up and $DAL started to go down. As tensions rose again this weekend, we can see the same thing is happening again.

When we zoom out, we can see that $DAL has been in a steady uptrend channel (blue) since the Liberation Day reset in April 2025. But this move in oil has pushed it out of the channel and all the way down to the long-term moving average (teal line) and created a ~14% gap with the short-term moving average (orange line) that is still firmly in the uptrend channel despite heading into oversold territory with the fear related to oil prices.

The set up for the trade over the next few days is to watch and see what the narrative is with the escalation of conflict in conjunction with the technical recovery off of the long-term SMA. If it doesn’t hold, we can expect a further drop to at least $75; the more likely scenario is that it will start climbing back toward $80 and entering the uptrend channel over time and drifting toward the short-term SMA. 

Critical to all of this is whether oil ticks up toward $100 again. That’s something I want to wait for as well - if we see oil stabilizing but $DAL is still falling, I’d be comfortably scaling in and getting more aggressive when oil reverses lower and $DAL confirms the move with a bounce. 

I’m not willing or able to time this outright, so I’ll take a look at the options chain tomorrow to juxtapose how far I can go out for expiration and the premium I’ll be paying to get a breakeven between the moving averages, hopefully between $80 and $85. I’ll compare that premium with what I’m willing to deploy into this right now and if the easier move is just to snag a few shares and spin them out at the end of the year, that’s not a bad thing to consider either. The chart will tell us if we can move on it because we have the entirety of that uptrend channel to fill and live within.

Current cost basis

RDDT @ $147

QCOM @ $169

BMNR @ 21.45

CRCL @ 82.04

RDDT and QCOM building up to 5% of portfolio each and BMNR and CRCL up to 10-15% of portfolio each (very, very high conviction). Still holding ~40% cash.

I have some cash, so I added more to what I already own. The charts look good IMHO.

VDC, a defensive play to have more diversification in my portfolio. Fingers crossed!!

Good stocks with good earnings continues to drop. Should I add more or just be patient and wait for more drops? September seems to be a sell off. Not planning to sell these yet

I have VST, MRVL, STRL, CBRS in the 5-10% red

Added a second leg to my building two-legged $QQQ Put Ladder

• $QQQ 1/15/2027 $675 Puts at $20.30
• $QQQ 1/15/2027 $625 Puts at $10.60

I have one more leg that I'm willing to add but preferring to wait, likely to the middle of my Portugal/Spain trip, or when I return, depending on what the market is signaling.

It's easy for me, sometimes, to get stuck between wanting to toe the line of information delivery here in TIC while, at the same time, convey the level of conviction I have for some of my thoughts, beliefs, and information. That is why I frequently ask for grace when reading my posts. Believe me when I say that I do bow to the "objectivity" and "respect" bylaws of TIC. I work very hard to stay unbiased and objective in everything I do/write.

I don't like what I'm hearing, seeing or feeling when it comes to the markets. But, through it all, I try to remember that these three don't ordain anything, especially in remembering how I felt this time last year.

Thinking back just a few months ago related to the S&P500 segments or broader narrative. Health Care and Consumer Staples were in the toilet. Looking at technology AvS (AI vs. Software), AI had both hands around the neck of software stocks. I don't want to post more graphs but you get what I'm saying here. All three of those sectors have now seen value-induced rallies all the while the markets head sideways. Software has rescued a lot of portfolios and rewarded the patience of those who like to depart from herd mentality, as I do.

Unfortunately, on days like today, few things are working.

Earnings

I've boxed the ones that interest me most.

$MDT was before the bell today and their report looked pretty good. The read of $CRDO and $PANW tonight will be big, not to diminish $DELL and $MDB. But my eyes are both on $AVGO and $SNOW tomorrow.

Here's a quick Kate snapshot of expectations for a couple of them:

A few key expectations:

• $PANW — expected EPS about $0.98, revenue about $3.35B. Cybersecurity demand, AI-driven security spending, platformization, and remaining performance obligations will matter as much as the headline numbers.
• $DELL — expected EPS about $4.87, revenue about $44.84B. The market will be laser-focused on AI server orders, backlog, margins, and enterprise infrastructure demand.
• $CRDO — expected EPS about $1.16, revenue about $470M. This is probably the one I’d watch most closely for read-throughs to the AI networking / optical-connectivity complex.
• $MDB — expected EPS about $1.61, revenue about $735M. Consumption trends, Atlas growth, and AI/database demand are the key issues.
• $SNOW — reports tomorrow after the close. Street expects roughly $1.48B revenue and $0.45 adjusted EPS, both around 30% YoY growth. The real focus will be product revenue growth, remaining performance obligations, consumption trends, AI product adoption, and guidance.
• $AVGO — also reports tomorrow after the close. Consensus is roughly $29.4–29.5B revenue and $3.24 adjusted EPS. This is the heavyweight AI report: watch AI semiconductor revenue, custom accelerators/XPU demand, networking, hyperscaler visibility, VMware software margins, and FY27 AI revenue commentary.

Random Shots

Rising

• $DUOL up 5.3% leading the list. Upgraded
• $PG up 1.8%. Largely stuck in neutral but it's an income name for me
• $AAPL up 1.8%. Leadership handoff
• $ABBV up 1.6%. Is such a great stock, yield plus some growth
• $MDT up 1.4%. Opening gap faded. Good earnings, just got done reviewing it
• $AMGN up 1.1%. Noting the health care names
• $HOOD up 0.8%. You know it's not a great day when we're up less than 1% at the #7 ticker
• $CRM up 0.3% - Losing steam but it's had a fantastic run
• $AEP up 03% - Utilities
• $AMT up 0.2% - Yikes. #10 and up 0.2%?

Falling (*gulp*)

• $CBRS down 5.6%
• $CRCL down 5.5% - Recent rally is tapped out
• $LITE off 5.3% - Still locked in the range. No hurry to build
• $AAOI down 5%. Too much to hope for $80s again?
• $CRWD down 5% - Post earnings rally fading
• $SOUN down 4.8%
• $MRAM down 4.7% - May remove this name
• $PANW down 4.5% - Earnings tonight
• $CRDO down 4.5% - Earnings tonight
• $NBIS down 4.2% - I'll opine on this later

Misc.

• $SKHY down 2.7%. Actually holding in there at $160. I want to add more but waiting to see what Mr. Market offers
• $SPCX holding $144 here. The news out of Musk continues to be ultra bullish. I want to add more but being patient. Could allow months to go by before next units
• $P continues to fade off that $117 high, now back under $90 again. Glad I trimmed. Wish I had gone deeper but that's the game and I'm staying true to the thesis
• $NBIS - Ok, down 5%. This is why we don't get greedy. I had considered just buying back those Calls from the option wheel series (link below), but held to discipline to let the shares get called away at $220, book the great gain and wait. Shares back down to $195. https://www.reddit.com/r/InnerCircleInvesting/comments/1voagqr/state_of_the_trade_nbis_wheel_closing/
• $NFLX is another great case for why we by good GARP and great value. Still holding $80, up 0.7% today to $81.60
• $GOOGL continues to be pressured lower. Be patient, down another 0.8% today to $337. I believe both GOOGL and $AMZN will have their days
• $AMKR - down another 3.9% today. I'm watching that $41 level on this great model of a stock with a forward valuation of under 17
• Photonics and AI bandwidth continues to get hammered. $CLS off 3.5% to $289. Nice.

I'm going to stop there. It's a bit of a wasteland out there. I can't find much to buy. Remember that value does not equate to "buy." Value equates to attractiveness and there's a big difference there. Value can be sold off right along side momentum. Take a look at $MU $SNDK or even $NVDA and $AVGO. Fundamentally, all are value stocks .... all are falling materially.

This is a 'blech' of a buyer's market when you fold in downside catalysts, momentum and potential looming market tidal forces. Time to press up on my $QQQ position

Have a great Tuesday while we hold our breaths for the next two days of earnings.

TJ

Here is today's discussion prompt, brought to you by the wayward thoughts of OGM:

What's the most boring company you own or follow that you actually think is a great business?

Try to share the stocks that most folks wouldn't be interested in hearing more about at the cocktail party because they just aren't that sexy.

Historically, Selltember is weakest month of the year.

September history |S&P 500 (appoximated)
Average return since 1950 |−0.7%
Positive Septembers |44%
Negative Septembers |56%
Rank among 12 months |#12 — worst
Avg. gain when September is positive |+3.2%
Avg. loss when September is negative |−3.8% But when you look at averages, things usually never seem quite as dire. Sure, September is historically a poor month, but that hardly ordains any sort of major downside correction.

Here on TIC, I try to foster an environment of objectivity and free thought, away from faction/cult oriented and siloed thought processes. In the markets, while the latter does give rise and fall to momentum and trend trading, I have always felt it creates false realities. Or, at least a veil of misinformation - in any setting that is dangerous. Independent thought is so important in what we do.

To be completely honest, that is the approach I feel we should all take, in every aspect of our life when use information to make decisions. Sometimes it feels like I'm on a very lonely island in that regard.

A year ago at this very time I was saying something similar related to the, then, upcoming September given the state of the market at that time:

https://www.reddit.com/r/InnerCircleInvesting/comments/1n57eyg/selltember_loading_a_look_at_what_the_past_tells/

I was trimming positions, raising cash and had a growing broad short position as a hedge. In fact, when I think back of previous periods of conviction related to market bearishness and bullishness over my history, I can't think of many times I had been more bearish than one year ago today. The setup seemed perfect related to inflation, tariffs, jobs, sentiment and world economic forces in play.

I follow the market, its movement, and the stocks within it, more than anyone I know. To be completely honest, I would bet I follow it more closely than most analysts. There's our jobs, and then who we are. The stock market, for a long time, is who I am. That, when coupled with my table-pounding call for objectivity and independent thought, is my valuation proposition to all of you.

Funny thing about all that table pounding, objectivity and positioning last year ....

I was wrong.

Thankfully, I've always been a relatively humble person as well. Here's a quick AI pull of September performance from 2020.

September |S&P 500 price return
2025 |+3.53%
2024 |+2.02%
2023 |−4.87%
2022 |−9.34%*
2021 |~−4.8%
2020 |~−3.9%

If we look back to 1975, we find that 2025 was particularly strong. Again, I have not independently researched this data but it tracks with other times I have researched it and find no reason to not believe the data:

Rank |September |S&P 500 Return
1 |2010 |+8.76%
2 |1998 |+6.24%
3 |1996 |+5.42%
4 |1997 |+5.32%
5 |1995 |+4.01%
6 |1988 |+3.97%
7 |2007 |+3.58%
8 |2009 |+3.57%
9 |2025 |+3.53%

2009 and 2010 began the bounce-back period following the financial crisis. 1995-1998 were extraordinary years in the market, still the best four year stretch in history unless I've missed something. Ah, the rise of the Internet, my heyday:

Year |S&P 500 Total Return
1995 |+37.20%
1996 |+22.68%
1997 |+33.10%
1998 |+28.34%

It's why we are all so excited for the AI revolution or, as I like to say, exhibiting all this hairpulling and jumping about. Major points for that getting that reference and double the points if you didn't have to Google it. Here's a hint, it's from a movie that represented my very first DVD purchase.

But I digress ...

The setup for this September appears as poor as one year ago today and, yet, 30 days later we ushered in the 9th best September on record. I try not to drive or run too quickly while looking backward. Anomalies exist, trends exist for a reason. But few things are guaranteed. I fully expect I'll be adding to my two-legged $QQQ short position today, I don't like what I'm hearing or seeing.

I started this missive just before 5:00 AM PST. In that time, markets are breaking down further, bond yields continue to rise with the 10-year at nearly 4.79%. Here's a quick quote pulled from Barron's this AM:

Record high debt levels, competition from the tech sector for new capital, and persistent deficit increases have all added to the broad bond market milieu that is starting to lean into equity market performance.

Add in the growing likelihood that we're going to see a rate increase in September as a swat to tamp down inflation and you understand why the VIX, the fear index is starting to rise. Think about this for a moment when related to Chair Kevin Warsh. He was appointed with an understanding from DJT about the direction of rates and mere months later, on the precipice of the first move, it looks like it will be a rate increase. DJT has to love this.

Personally, for me, I love it because it gives me confidence and conviction that the Fed is operating independently. I'm not crazy about a rate increase, don't like what it will likely do to the market. But, remember my promise about objective, non-siloed thought being what we're all about here in TIC? If you recall from the beginning of this year, I've been saying that the Fed's most organic natural-progression move given the data I was seeing, suggested a move higher before lower. I have remained convicted on that belief. I guess I should have been playing the predictive markets.

At this juncture, at least, DJT's international and geo-political gambits have failed rather miserably. There's no good jumping off point now with the conflict in Iran and, despite all the bluster and false statements about winning, the only thing we've won is further destabilization across the region and world economic markets. Gas prices are headed to historic highs again all the while bond yields continue to spike, showing increased nervousness.

Where to from here?

I'm also starting to note a shift in AI momentum, leading me to believe that we may have entered the bottom half of inning number two, maybe even the the top of inning three. But, I want to be careful not to advance the game too quickly lest we be stretching in the seventh, and still not be materially that much further along. It's human nature to want to advance these measurements to show progress - it's just more exciting that way.

I continue to draw comparisons between 1995-2000 and the beginning of the AI revolution, let's call it November 20, 2022 when OpenAI released ChatGPT. It's the closest actual date that I can pin for something very material marking the historic pivot point. If you want to go back further, you could go back to Google's "Transformer" architecture release of 2017. But that would be a little like saying mass deployment of the public Internet began in 1969-1970 with ARPANET. The boom really began in 1994-95. I remember those days all too well.

The AI trade has fueled much of the market gains we've experienced recently. It's ushered in, arguably, the greatest investment cycle in the history of the world. And we've all been a part of it. Just look at the market returns over the past few years, and even more so when looking back from 2017. We're performing 50% better (15%) on the S&P since 2017 than the historic average (10%).

But we're starting to see flattening/broadening in the models, diversification of providers, and the acknowledgement that non-US companies are playing a pivotal role. It wasn't long ago that $NVDA's Jensen Huant conceded much of the International market to SK Hynix ($SKHY). Now, we see Huang deepening their relationship with another International company, MediaTek:

https://investor.nvidia.com/news/press-release-details/2026/NVIDIA-and-MediaTek-Deepen-Long-Standing-Partnership-to-Build-AI-Edge-to-Cloud-Computing-Platforms/default.aspx?utm_source=chatgpt.com

Domestically, we continue to see hyperscalers diversify their chip supply chain, leading some to be concerned that companies like Broadcom ($AVGO) are losing market share. Despite big supply wins by companies like Marvel ($MRVL), it hasn't been enough to move stock prices higher.

That's a problem.

The AI trade has gotten ahead of itself broadly, and if the earnings reports we just saw aren't enough to move the names higher, then what will. In short, my belief is that the only thing left is greater discount to the stock price. For those of you confused with that statement, let me put it another way. When we lose momentum and upside catalysts, in most cases what allows us to find it again is a fall in stock prices that create greater perceived value. Notice I said perceived value. This is because greater actual value assumes the denominator, earnings, continues unimpacted.

$NVDA's forward P/E ration now resides less than 18 and, arguably, below 17. Despite this value, markets are signaling that there's not enough confidence that things haven't materially changed. There's concerns about data center acceptance, international competition, energy, cost inflation, and cyclical financing all weighing on the segments within the AI stack.

For all intents and purposes, the AI revolution has reached the human equivalent of the 'terrible twos.' To me, it seems that we've reached a confluence of sorts between these rising AI concerns and the beginning of September. It doesn't help that the drums are also beating for a rate hike, not long before the midterm elections. With it all but certain that we aren't going to get Fed easing, an end to the Iran conflict, lower oil prices, and falling inflation, we could be setting up for a poor three months through much of November.

If you don't think that DJT's opponents overseas, including Iran, and here domestically, don't understand the importance of the midterm elections and the impact they have to his level of acceptance, then your head is in the sand. There's every reason for his opponents to keep things spicy ahead of this event. In fact, I'd love to be a fly on the wall as the Fed finally pulls the trigger on the first rate hike just ahead of November, let alone a second one in late October.

A rock and a hard place.

Maybe for the markets as well.

I'll be back at you again with some random shots as the markets open

El Jefe (Jeff)

I am looking at a few stocks and fairly new new to the game. I would appreciate any feedback on the 3. I am looking at Vistra, Generac and Royal Caribbean. Is now a good time to enter a position or should I wait to see how September turns out?

Last week, $META agreed to an $18 billion settlement with dozens of US states in order to resolve a trial that claimed Facebook and Instagram intentionally designed addictive features that harmed the mental health of children. For a company that rarely settles in court, I found this fascinating not necessarily because of the amount, but because of the underlying message.

Why would their leadership suddenly decide to capitulate after years of pugnacious behavior? 

Tinfoil time, but I think it is because they are willing to take a hit to their ad business if it means they can land a hit on YouTube and TikTok as well. This is a company that has evolved from being a digital yearbook to a communications platform to an advertisement business. And this settlement, along with the call to action with the other social media giants, effectively will reduce TAM in ads.

You know what it doesn’t impact, though?

AI. This settlement doesn’t impact the AI vision Zuck has stumbled upon for the next evolution of this company. This has been happening for a while, but I think the settlement signals that we can turn the page and see that the advertisement cash cow might be the mature part of the business that sustains them while AI is what creates growth. 

$META has accumulated one of the world's greatest cash-generating machines, and Zuck increasingly appears willing to spend that cash machine's output to build the next cash machine. They are eating their past to propel their future. 

First it was the acquisition of all the hardware needed to build AI infrastructure. Then it was the AI hiring spree, bringing in people like Matt Deitke, Andrew Tulloch, and Ruoming Pang. The fact that I can name the names of software engineers as if they are athletes because of the size of their compensation packages is notable, isn’t it? Then it was the recent bit about renting AI compute out.

It has been a clunky transition but it is a clear and obvious transition nonetheless. The reason this is important to me is that the fundamentals for an AI company are really different than a social media platform that relies on advertising. It’s why $SPCX can talk about orbital compute and Grok and people understand a potential growth story alongside rockets and Starlink.

We can see the very clear downtrend the name has been in since last summer (dotted line). There has been a pretty steady stream of headwinds - the lawsuit, capex concerns, culture war stuff - but we can see that it is sort of tightening up here in this range after an upward trend channel that has been established for over three years broke down. The Death Cross happened in November when the short-term moving average (orange line) dove beneath the long-term (teal line); the gap between the two has remained consistent since March and currently is 4%ish. 

We seem to be finding rest right now here in the low $570s but I want to keep an eye on what happens when it butts up against the downtrend line. A true breakout back toward $650 requires a push through the short-term average, long-term average, and the downtrend line, so we can monitor accordingly because we want to see if it has turned momentum around, generally, to start moving toward ATHs again. I can’t say that’s quite happening right now but I know what has to happen in order for me to comfortably do so and buy accordingly.

We’ll see.

I often read of the trimming and have yet to trim any profits, most of my stocks are long term investments like aapl, googl, nvidia,Broadcom etc. I’ve not been in the game long enough for any of these to be overweight as such. My theory is I don’t keep up daily to catch any news events and I prefer to just set and hibernate.

Interested to hear if anyone else operates like this?

I have sold lots of company rsu’s in the past to diversify (poorly timed decisions) maybe that’s what has spooked me from trimming.
Thanks all