Hot Inflation, a War Back On, and Closing the SpaceX Short

Friday's PCE, the inflation gauge the Fed watches most, came in warm. The core rate was 3.4% over the year, a tick up from 3.3%, with monthly spending strong at 0.7% and first-quarter growth revised higher. In plain terms, inflation is still sticky and the economy is still resilient, which is exactly the mix that keeps this Fed leaning toward higher-for-longer rather than cuts, and keeps the dollar firm. On paper that is a headwind for gold and silver.

But here is what actually happened. Gold had already washed all the way down to around 3,960 an ounce in the panic, then on the inflation print it turned and ran back to about 4,065, up one percent on the day. Silver fell further first, which is what it always does as the higher-beta one. That wash-out then bounce is the exact pattern I was holding the metals for. The selling exhausts itself into the bad news, then the haven bid comes back. I did nothing here except keep holding, which was the whole point of building the position with cash-secured puts underneath rather than chasing it higher.

The bigger story for the broad market was a split inside the AI trade. Micron, a memory-chip maker, reported blowout earnings and gapped up around 18% at the open, briefly worth more than Meta and Tesla. Good news, in isolation. The problem was it could not hold the gain and faded back with the rest of the market, even as Wall Street analysts raced to lift their price targets. When a stock cannot hold a blowout plus upgrades, that tells you more about the mood of the tape than about the company.

Then Apple fell about 6% on the very same root cause, from the opposite side. Apple announced price increases on Macs and iPads, and the reason was the exact memory shortage that is good for Micron. So the thing that helps the chip makers is now a cost showing up in the margins of the big consumer-tech names. That is the split I have been writing about for weeks, finally showing up in prices. The companies that sell the picks and shovels of the AI build-out can win while the expensive megacaps that have to buy those parts start to lose. It is the clearest evidence yet for the idea that sits behind a lot of how I am positioned: own the builders, fade the most expensive names.

The peace I wrote about last week did not hold. Over the weekend it escalated into actual strikes. After an attack on a ship in the Strait of Hormuz, US forces hit Iranian military sites, Iran hit back at bases in the region, and the rhetoric went to the extreme end. The US Navy raised its threat level for the Strait, the single most important chokepoint for the world's oil. Crude had settled around 69 dollars on Friday, before any of the weekend news, which means the market has not yet priced in a live, shooting conflict in the Gulf.

This is the exact tail I kept flagging as the thing that could re-ignite oil and undo the whole disinflation story, and it is now the base case heading into the new week rather than a side risk. For the book it cuts both ways. It is another reason to expect the safe-haven bid in gold to keep coming back, which supports the metals, and it is a live upside risk to oil that I no longer have a position in, having closed the crude trade last week. I am treating oil the way I always have here, as a range driven by headlines rather than something to forecast, and for now I am happy watching it from the sidelines with the metals doing the hedging.

This is the cleanest update in the book. My SpaceX short has done its job, and now it has a hard reason to come off. SpaceX has been confirmed for addition to the Nasdaq-100 from 7 July, and the index funds that track that benchmark are expected to start buying the shares after the close on 6 July. That is a large, price-insensitive, calendar-dated buyer arriving on a known date. It is the opposite of what you want to be short into.

I already covered three quarters of this short at an average of 149.73, banking roughly a 26% gain on that portion, and left a small stub on for the post-listing drift. That drift has largely played out, and now the asymmetry has flipped. Short interest has climbed from about 8% to 13%, so the crowd is leaning the same way I am, right as a forced buyer shows up. So the plan is simple and disciplined: close the runner by Friday 3 July at the very latest, ahead of the index buying. The thesis paid in full. When the edge is gone and a known catalyst points the other way, you take the trade off and move on. There is no prize for being a hero with the last 25%.

While the headlines thrashed around, the income side of the book did exactly what it is built to do. Under silver, the 60-strike cash-secured put I had sold was assigned at expiry, which simply means I now own the extra silver I had agreed to buy, at a better effective price once you count the premium I collected. That takes silver up to its full intended size on a lower basis, which is fine, because owning more silver cheaper is the entire point of selling those puts. On top of that I sold a fresh, lower-strike put to keep the premium engine running.

I did the same thing across a few names this week. On McDonald's I started selling cash-secured puts below the market, which pays me premium now and sets disciplined prices at which I would happily add to a name I already like. On gold I sold a short-dated put for a small credit against the long. And on the corn trade I put in the last planned tranche, completing that small technical position. None of these are exciting on any given day, and that is the point. They generate steady credits and lower my cost of holding while the loud trades, the short and the metals, do the directional work.

It comes down to two questions again, harder versions of last week's. First, oil. Monday's reopen has to price a live Gulf conflict that Friday's close did not, so crude and the safe-haven bid in gold are the things to watch. Second, the AI trade. Was this week's drop a one-off flush, or the first leg of a real re-rating in the most expensive, most crowded part of the market. The Apple-versus-Micron split says the rotation underneath is real, whichever way the headline index goes.

I am set up for it without needing to guess. The metals are held with puts underneath and a haven bid that keeps proving it is one headline away. The income trades are laddered to get paid while I wait. And the one position with a clean, dated catalyst, the SpaceX short, is coming off into that catalyst by Friday. That is the whole job in a week like this. Not to predict the chaos, just to be positioned so you do not need to. Reply any time, I read every one.