Speak of the (Venti) Devil

In yesterday's note we discussed waiting for a rally in Starbucks before looking to attack the short side again potentially into 2025. 

Consistent with this market, however, everything--and I mean everything--seems to get pulled forward on the bull side. 

Specifically, Starbucks just effectively plucked Chipotle's highly acclaimed CEO. 

Shares of SBUX are surging more than 20% as I write this. And while I respect Brian Niccol to a high degree, the long-term dynamics of SBUX are still such that the stock faces far more headwinds than tailwinds. 

Technically, $95-$100 should be a firm resistance area, with the stock currently printing a $92 handle. 

From a big picture perspective this move from SBUX is  very much on brand for this broad market bull run--Every single bearish sign is being fought tooth and nail, not unlike the Treasury and Fed trying to outsmart the business cycle and avoid a recession. 

The analogy would be a controlled or prescribed forest fire, which humans have been using for at least a few hundred years; Low intensity fires that clear away the underbrush also make it less likely that future fires will spread into the canopies of established trees, causing more serious damage. If we had just gotten the recession out of the way we would be headed towards a healthier new cycle by now, in all likelihood. 

Instead, the underbrush has built to a dangerously high degree, with a much greater probability of a nasty recession incoming into 2025 as The Fed and Treasury avoided the controlled low intensity forest fire. 

And despite Mr. Niccol's track record, this cycle is bigger than all of us, which means SBUX is still setting up as a nice short after the initial exuberance wears off.