Mission 49.24 Target

The Briefing Room

Last week provided us with key economic data points that complement the earlier November CPI release. Let’s recap some of the pivotal figures:

• Core CPI (MoM) and Core CPI (YoY) aligned with expectations, clocking in at 0.3% and 3.3%, respectively.

• CPI (YoY) ticked up slightly, rising by 0.2% to 2.6%, hinting at potential persistence in underlying inflationary pressures.

U.S. Personal Consumption Expenditures (PCE) Data:

• PCE Price Index (MoM) (October): Actual 0.2%, unchanged from the previous figure and in line with estimates.

• PCE Price Index (YoY) (October): Actual 2.3%, up slightly from the previous 2.1%, matching estimates.

• Core PCE Price Index (MoM) (October): Actual 0.3%, steady and consistent with expectations.

• Core PCE Price Index (YoY) (October): Actual 2.8%, inching up from the prior 2.7%.

Labor Market Data:

Initial jobless claims showed a modest improvement, coming in at 213k versus the prior report of 215k. This continues to reflect a resilient labor market, albeit with signs of slowing.

Inflation Trends: A Shifting Pendulum?

The pendulum may be starting to swing on inflation. Evidence from other economies that initiated rate-cutting cycles earlier suggests a similar trajectory might unfold in the U.S. For example:

• Euro Area: After briefly dipping below the European Central Bank’s 2% target, inflation has rebounded above it. Core inflation held steady at 2.7%, while services inflation remains sticky at 3.9%.

While we’re not witnessing a 2022-style inflation surge, the persistence in certain inflation metrics—especially in services—raises questions about how low inflation can realistically go.

Even globally, the challenge persists. The Reserve Bank of New Zealand—widely recognized as the first inflation-targeting central bank in the post-1945 era—has also voiced concerns about entrenched inflationary pressures.

U.S. Policy Considerations: The Stagflation Debate

The Biden administration’s fiscal policies, deregulation initiatives, and tariff adjustments point to a dollar-strengthening agenda. However, these moves could inadvertently entrench inflation at higher levels, raising the specter of stagflation. If pre-pandemic inflation levels remain out of reach, the broader economic narrative could shift dramatically.

Investment Implications:

While it’s still early to call stagflation a definitive trend, investors can start exploring ways to position for this potential macroeconomic shift. Opportunities could arise in:

1. Inflation-sensitive assets such as commodities and real estate.

2. Treasuries and TIPs for those looking to hedge against long-term inflation.

3. Sector-specific plays, focusing on companies with pricing power and resilience in low-growth environments.

4. Prediction markets that allow speculation on key macro trends.

Staying ahead of these evolving narratives will be crucial for identifying actionable investment opportunities.

Visiting Past Intelligence

In Mission 42.24, I introduced $AAPL within the "Target Acquisition" segment, highlighting its potential as a solid play with a targeted entry price of $220. At that time, Apple was trading at $229.54, and I anticipated a pullback that would provide an attractive buying opportunity. My trade idea had a clearly defined risk and reward structure: an invalidation price at $215, representing a tolerable 2% decline, and an upside target of $250, a 15% appreciation from the entry.

To express this idea in the market, I utilized a combination of equities and options to manage risk, optimize returns, and leverage time effectively. Here’s a breakdown of the trade structure:

Positioning and Risk Management

1. Defining Risk: I always ask myself at what price I am willing to take a loss. This "price invalidation" serves as my line in the sand where the trade thesis no longer holds. For this $AAPL trade, $215 was my risk threshold.

2. Sentiment Analysis: I evaluated the market’s sentiment toward Apple, noting positive option flow and a consensus belief in the company’s financial strength and growth potential. The company's filings showed a promising trajectory, reinforcing my confidence in the stock’s potential to outperform in the near term.

3. Combination of Equity and Options:

- I acquired shares to maintain exposure with no time decay, ensuring that I could hold the position indefinitely to ride out potential volatility.

- I complemented this with options to amplify returns and define a time horizon.

Trade Details

- Equity: Purchased Apple shares at $220 during the pullback.

- Options:

- Bought the Dec 6th $235 call (a 7% increase from entry price) with a 5-week time horizon.

- Bought the Jan 17th $240 call (an 11-week horizon as the 10-week chain wasn’t available), reflecting a 9% increase from entry price.

Performance Update

Since Mission 42.24, Apple has delivered a strong performance:

- Equity: Shares have appreciated by 7.4%, trading near $236.

- Options:

- The Dec 6th $235 call has increased by 72%, moving from $2.20 per contract to $3.80.

- The Jan 17th $240 call has surged by 78%, rising from $3.15 per contract to $5.62.

Outlook

I remain long on this idea, holding both shares and options. The thesis has not only held but has gained further momentum as Apple approaches key technical levels. I anticipate that early 2025 could bring explosive movement, fueled by strong fundamentals, market sentiment, and macro tailwinds. My position remains well-aligned with my risk and time-management framework, and I’ll continue to monitor the evolving dynamics of this trade.

This structured approach, combining equities and options, demonstrates the power of defining risk, leveraging time, and aligning market sentiment with actionable trade ideas. Apple’s journey from Mission 42.24 to now has been a rewarding one, and I’m excited to see how this plays out in the coming month.

Novum Cognitio: Microsoft ($MSFT)

This week’s Novum Cognitio focuses on $MSFT, which has been consolidating near the $425 price range. This grouping at a key level suggests potential momentum building. Fundamentally, Microsoft continues to assert its dominance with a $20 billion cash reserve, strategically deploying compute and productivity tools, and advancing their AI-driven product lineup. A standout development is the AI Copilot feature, which enhances their Microsoft Office suite and drives significant ARR growth through upselling.

Additionally, intriguing rumors have surfaced, hinting at a conversation between Michael Saylor and Microsoft’s Board of Directors and CEO Satya Nadella regarding Bitcoin. While unconfirmed, even a hint of such a narrative could spark excitement on the street. If Microsoft leverages Bitcoin strategically, it could amplify both its capital efficiency and market sentiment, creating a compelling case for further upside.

Market Insights

Option flow analysis reveals considerable interest in $MSFT calls. Large premiums are consistently being allocated to year-end contracts, with additional attention on early 2025 dates. This pattern indicates that institutional players may be positioning for a potential breakout or sustained upward movement in $MSFT’s stock price.

Trade Expression

To capitalize on this setup, I like the balanced approach using both equity and options:

1. Equity Position: Acquire shares at current levels, allocating capital based on your risk appetite.

2. Options Position:

- Short-term focus: Consider the 12/27 $430 Call to capitalize on near-term momentum.

- Extended horizon: Depending on price action and developments in the next week, extend positioning to include the 1/17 $440 Call Contract.

This approach allows flexibility and leverage, balancing a stable position in equity with amplified returns through options contracts. The combination of Microsoft’s robust fundamentals, speculative catalysts, and positive market sentiment positions $MSFT as a compelling opportunity for the weeks ahead.

Target Acquisition

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Thank you for your time

Nedrick H.M

EquityAgent ∫︎