Farming Out In Left Field
Wargaming the next month, the resurgence of the space race, and a commodities sector you can't afford to ignore.
Every morning when I’m cooking breakfast, I put Bloomberg on my iPad in the background. Lisa Abramowitz and the Plucky British Guy are usually on, talking about the “front and center” narrative for the markets.
It’s been getting repetitive.
Market participants have been hyperfocused on inflation and rates throughout the summer. Prices are moving on CPI and PPI data, and everyone’s focusing on the Fed into the (potential) September rate cut.
I predict that the next big move will be driven by a catalyst or fast narrative to shift to something that comes out of left field. The Fed has become a distraction.
Some Speculative Headlines
Here’s a sampling of what could happen in the markets in the future:
Downside skip risk in housing due to deportations shows up in data
AI hyperscalar capex has overshot potential future cashflows, which becomes evident with another “Deepseek” efficiency event
Or, emergent agentic AI proves itself fast and we’re off to the races, again
Russo-Ukrainian détente causes unwind in defense stocks, PLTR unwinds which takes out the momentum complex
US government becomes more aggressive with single company investments; MP and INTC are the start of a new sovereign strategy that causes industrials to ramp
China hack of DoD leads to investigation in MSFT, unwinding the tech trade
My sense is that I’m early on this idea, and it could be one more opex cycle, as we near the Fed September decision, where something else captures the market narrative
The Next Phase of the SOLBAT Trade
Solar stocks had a hard push on Friday:
The catalyst was that the Feds provided new guidance on tax credits for clean energy projects.
Given how Hyperscalars are building out, the solar trade makes sense. I’ve stated the case here and here.
Solar doesn’t need subsidies, AI power demand is too great. Yet if the Trump administration is going to continue interventions in markets, don’t be shocked if they allow solar subsidies to stick around as they are (hopefully) aware that the AI arms race is actually an Electrons arms race.
There’s another part to the SOLBAT trade, and that’s batteries. If solar buildout hits hard, then energy storage is just as lucrative of a trade.
One battery ecosystem play to watch is lithium. SQM just saw a big push last week:
And LIT, a lithium ETF, is starting to show signs of a bottom:
If you’ve traded lithium stocks before, you should know the tickers. If you haven’t traded them before, just know at some point your heart will get broken.
Names to watch: LAC, LITOF (OTC), LAR, SGML.
Free Alpha in EOs
The speed of this administration is incredible. They’re using a “flood the zone” tactic, moving on multiple fronts so that it’s difficult for political opposition to mount a defense, much less any spin in the media.
This is also giving us incredible opportunities to play under the radar stocks. When the Trump administration issues an Executive Order, I’m immediately throwing it in GPT to process it.
The most recent EO that has my interest: Enabling Competition in the Commercial Space Industry. I think you can guess what stocks to look at— RKLB, PL, ASTS.
There’s also one name that’s new to the markets - VOYG
It’s had a rough go of it:
I’m not interested in bottom-fishing, but if it does start to show signs of reversal, then this could have some solid tailwinds going for it into the end of the year.
Up On Deck
For Convex Spaces Clients, we’ll be focused on two themes:
Simple pullbacks after post-earnings runs
Failed breakdowns on momentum high flyers
How to Knifecatch a certain oversold yoga pants merchant
We also did just have last week’s deep dive pick hit our trigger on Friday.
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