As equity prices come under pressure amid rising interest rates, we think it is appropriate to close a few trades early.
The trades listed below are working, but we do not want to let the winning trades turn into losers. So we want to linger in the cains and revisit the ideas if and when interest rates stabilize and peak out. We haven’t made it a secret that we have been bearish on bonds. Our position is that the 30-year bond will trade at a yield to maturity in the 6-handle range, with the possibility that it could reach 7% should the world conclude that the US government has no intention of reducing the deficit and curbing its aggressive borrowing. They will only slow down their profligate ways if the market rejects their attempt to borrow and spend.
The Super Micro Computer Trade and Oracle ideas are AI data center trades. Since the space is showing signs of instability, we think it is best to close the trades.
Circle is a crypto-driven company, as it is one of the two largest issuers of stablecoins. With the Clarity Act stalled and bitcoin trading a bit wobbly, we think it is best to take the money and run.
Finally, there is United. With jet fuel prices rising globally and overseas availability becoming more unreliable, we think airlines could be hit with a left-field shock, leaving customers stranded. We do not like this kind of uncertain liability, so we think it is best to close the trade and look to reenter when energy supplies are more certain.
Closing these trades crystallizes $1,600 of gains.
