MW The easy money will be driven by Trump and the dollar, not AI, say Big Short investors

By Barbara Kollmeyer

Seawolf Capital co-founders place bets on Brazil and Chinese stocks

Our call of the day comes from two former "Big Short" traders whose investment firm logged a blockbuster 2024, and whose strategy has little interest in the world's hottest trade.

"We sit here and we're scouring the globe and everyone is losing brain cells around AI, all that stuff," Porter Collins, co-founder of Seawolf Capital, told CNBC in an interview on the sidelines of a Miami hedge fund conference, Global Alts Miami.

Where they're focusing instead is on "how to make the easy money," he said.

Collins appeared with Vincent Daniel, also a co-founder at Seawolf - both are former members of famed investor Steve Eisman's team at hedge fund FrontPoint Partners. Eisman, now a portfolio manager at Neuberger Berman, and his team were portrayed in Michael Lewis' book and later film "The Big Short," and shot to fame for bets against collateralized debt obligations tied to the U.S. housing market crash of 2008.

CNBC pointed out that Collins and Daniel had noted on the panel earlier in the day that they wanted to stay far from the AI trade. But Collins explained that they are "little bit AI," when it comes to what they're looking at.

So screening the cheapest stocks in the world right now, they are all showing emerging markets, he said. "We pitched Brazil and Chinese stocks," said Collins. "Everyone hates these Chinese stocks, Alibaba, which is AI, came out and said their model is better than DeepSeek. I didn't know what DeepSeek was before Saturday and still don't."

"Everyone talks about how expensive things are but go to Brazil - 10% dividend yields in the index. So where can we make money where everyone is not looking?" he says. The iShares MSCI Brazil ETF EWZ is up 10% so far this year after a 35% drop in 2024, and yields over 6%.

The pair say it's important to pay close attention to what President Donald Trump wants and will get, which was at the core of a 66% return in 2024 for Seawolf.

He credited a handful of winning bets, including one on Fannie Mae and Freddie Mac preferred shares that more than doubled and a bet on a plastic recycling company PureCycle Technologies $(PCT)$ that also more than doubled.

Daniel said that investors should also be prepared for more events that spark volatility. "The straw that stirs the drink is President Trump. It's no longer the Fed," he said. "We've seen it for seven days so far. He comes out, he moves markets."

"It's our job to be extremely objective and try to determine where the puck is going. In many respects, what he wants is pretty clear, in terms of American exceptionalism, whether he's going to use tariffs or not, in terms of agreements. Our view is that hopefully we can take advantage of where we think he wants to go and what is most probable of what he's going to get done," said Daniel.

But for those emerging markets bets to work and "American exceptionalism to work," the dollar has to weaken," said Daniel.

"If the dollar starts to weaken, a lot of people are going to start looking at emerging markets stocks, relative to owning the top 15 names. And this is where we see value, and I know value is a four-letter word with a lot of people these days, but in general, that's the crux of our analysis and our process, and then from there we go from determining rates of change. And that's where we see the biggest opportunity," he said.

Read: Stock market's $1 trillion wipeout is a taste of what can happen when AI bets unspool

The markets

Stock futures (YM00) (ES00) are mixed, with Nasdaq-100 futures (NQ00) leading gains. Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y are steady and the dollar DXY is up around 0.3%.

   Key asset performance                                                Last       5d      1m      YTD    1y 
   S&P 500                                                              6012.28    -0.61%  2.22%   2.22%  22.08% 
   Nasdaq Composite                                                     19,341.83  -1.47%  -0.74%  0.16%  23.76% 
   10-year Treasury                                                     4.57       -1.20   -0.60   -0.60  53.62 
   Gold                                                                 2754.4     0.84%   5.13%   4.36%  35.50% 
   Oil                                                                  74.25      -2.78%  4.39%   3.31%  -3.55% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor's Business Daily.

The buzz

The Federal Reserve will announce its first policy decision of 2025 at 2 p.m., followed by a Q&A session with Fed Chair Jerome Powell.

Microsoft $(MSFT)$ (preview), Tesla $(TSLA)$ (preview) and Meta $(META)$ are in the earnings spotlight after the market's close.

Chip-equipment maker ASML $(ASML)$ reported blowout bookings and U.S. listed shares are up 7%.

Starbucks' $(SBUX)$ quarterly results weren't as bad as expected.

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The chart

"In our view this is a correction and not the start of a sustained bear market," says a Goldman Sachs team led by Peter Oppenheimer, chief global strategist, of the recent Big Tech selloff. The firm charts the average global stock market performance after the first Fed rate cut when a recession ensues and the average performance when there isn't a recession. The current performance is in orange.

Top tickers

These were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern:

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   GME     GameStop 
   ASML    ASML 
   TSM     Taiwan Semiconductor Manufacturing 
   AAPL    Apple 
   PLTR    Palantir Technologies 
   BABA    Alibaba 
   HOLO    MicroCloud Hologram 
   AMD     Advanced Micro Devices 

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-Barbara Kollmeyer

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January 29, 2025 06:55 ET (11:55 GMT)

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