Fading Last Month’s Post-CPI Rally

Readers may recall I added some short bets after the big post-CPI rally last month (Fading The Post-CPI Rally). After noting that Carl Icahn was skeptical of the rally, I wrote:

I shared Icahn’s view of the rally, and used it to buy puts on a handful of stocks that spiked by double digits on Thursday. In the event Icahn and I end up being wrong about this being a bear market rally, I looked for stocks with poor fundamentals that might underperform even in a new bull market. These were the four names, along with their percentage gains on Thursday:

• Riot Blockchain, Inc. (RIOT): +10.62%
• Opendoor Technologies Inc. (OPEN): +26.49%
• Carvana Co. (CVNA): +31.62%
• Redfin Corporation (RDFN): +31.8%

Aside from their weak fundamentals and charts prior to Thursday, they were all in vulnerable industries. RIOT is a bitcoin miner, when crypto is being roiled by the FTX collapse; OPEN and RDFN are in real estate, which remains vulnerable to rising interest rates, even if the Fed tapers its rate hikes; and CVNA deals with used cars, the prices of which sank in Thursdays CPI data.

I’m currently talking with my developers about starting a site (or perhaps modifying this blog) so you can follow these trades in real time.

Fading The Post-CPI Rally, November 11th, 2022.

In a follow up post earlier this month (“After The Carvana Crash”), I noted that I had been wrong about Redfin so far. Not anymore. Even after its 12% bounce on Thursday, shares of Redfin were down 18.55% since I bet against them last month.

Shares of the other three names were down worse:

• RIOT: -35.96%
• OPEN: -45.67%
• CVNA: -62.54%

Tracking These Trades In Real Time

In my November post, I mentioned I was planning to start a site where you could follow these kinds of trades in real time. I have now done so on Substack. You can read about it here.

More By This Author:

Caution On Fed Day
After The Carvana Crash
Where We Go After Wednesday's Rally