GM. This is Milk Road Macro, the newsletter that knows that if your portfolio makes you feel like taking a screenshot to post for clout, itโs time to sell.
Hereโs what weโve got for you today:
- โ๏ธ Burning reserves.
- โ๏ธ Ackman buys the dip.
- ๐๏ธ The Milk Road Macro Show: Why Geopolitical Chaos Is Bullish For the U.S. w/ Eric Wallerstein.
- ๐ช Verizon and Cisco are cutting thousands of jobs.
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Prices as of 10:00 a.m. ET.
BURNING RESERVES
Have you noticed that despite the major geopolitical drama in the Middle East and the Strait of Hormuz being closed, gas prices aren't at $10 a gallon yet?
Pinteresting, innt?
Well, there's a sneaky reason for that.
In case you havenโt noticed, countries are aggressively draining their emergency crude reserves.
With the Strait blocked, global oil supply dropped by a massive 11.1M barrels per day in March. To keep the global economy from immediately face-planting, governments dumped 200M barrels of crude onto the market in April alone.
That's a whopping 6.6M barrels per day.
Sounds great, right? Well, tap the brakes because now, we are running on fumes.
Source: The Kฤkฤ by Bernard Hickey
- We've tapped 280M barrels of reserves since the conflict started.
- Global reserves are now sitting at their lowest level in eight years.
- We only have about 45 days of refined product supply left in stock.
Thatโs not many days.
The takeaway for your wallet
This price stability is a temporary illusion. When these accessible reserves run dry, a sudden spike in oil prices could send inflation roaring back. That means interest rates will stay high for longer, putting a major squeeze on high-multiple growth stocks.
The pressure to make a deal and reopen the Strait is higher than ever.
Letโs hope thereโs a chapter about this in The Art of the Deal (there isnโt).
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ACKMAN BUYS THE DIP
Wall Street has been absolutely brutal to Microsoft (MSFT) this year, knocking the stock down 15% to around $409.
Why?
Investors are panicking over Microsoft's gargantuan $190B annual capital expenditure budget.
But billionaire hedge fund manager Bill Ackman of Pershing Square saw the panic and immediately grabbed his checkbook. He even sold Google stock to raise more capital.
No doubt about it, Wild Bill is bullish.
Ackman's thesis is simple: Microsoft is a money-printing monopoly. Despite the heavy spending, MSFT's quarterly revenue grew 18% to $82.8B, Azure cloud revenue is up 40%, and they can easily monetize their AI investment by charging businesses $30 a month for Copilot. ๐ฐ
Bottom line: When an elite monopoly with a fortress balance sheet gets beaten down to 21x forward earnings, smart money steps in. Platforms that can fund their own expansion directly from cash flow build an unbreakable competitive moat.
Milk Road Macro would like to remind you that just because one billionaire buys the dip, it doesnโt mean you have to!
A lot of the market has serious doubts about top-blasting U.S. large caps at these price levels. Thereโs no need to bet the farm. Donโt get emotional. Make a plan and stick to it!
In the meantime, letโs see how this plays out for Ackman.
Wrapping up
We are looking at a classic tug-of-war.
The stock market is sitting near record highs, but behind the scenes, a massive energy crunch is brewing, tech giants are borrowing billions, and Bill Ackman is buying the dip on Wall Street's panic.
The S&P 500 and Bitcoin have both finally shown signs of cooling price action. Weโll see if this is just a dip or a deeper correction.
Trump and Xi agreed to deals on beans, Boeing, and beef, but not much else. Expect negotiations between these two countries to drag on and drag out as the economic cold war continues.
Sell in May and walk away? Or double down while the price is down?
You do you, but here at Milk Road, weโre still betting on the bull run.
Hold on tight!
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BITE-SIZED COOKIES FOR THE ROAD ๐ช
President Trump and Xi Jinping agreed at a summit in Beijing that the Strait of Hormuz must stay open. Plus, the U.S. cleared 10 Chinese firms to buy Nvidia's high-end H200 AI chips, pushing NVDA's valuation near $5.6T.
Telecom giant Verizon and networking king Cisco are cutting thousands of jobs. Why? They are aggressively trimming payroll costs so they have more cash to spend on data centers and high-speed tech infrastructure.
Trump calls off Iran attack citing Middle East leaders' request to wait for negotiations.
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