CSO Hero Farmed Cooperative Former Constrained Capital CIO. ESG Orphans Index creator. Tell the truth, help others. https://nitter.gq/t.co/6YLmV9rUEu
Joined February 2019
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I wrote of why, plus the case for bonds, and what would make me wrong:
levelwiththemarkets.substack…
I have no idea what the next five hours will bring.
I will say this, though: if stocks end up in the red today, and the TLT breaks above 82 1/4, the concept that stocks may crash to rally bonds, becomes more possible.
Said differently, after this very strong open and plenty of can’t miss buyers, a.k.a. FOMO, if we ended up near the lows by EOD and the TLT is higher after a somewhat hot Econ number, Monday could be a real problem.
I’m not calling for a crash. I’m saying if the Price action deteriorates by 3:45 PM today and Bonds rally, be very cautious..
TGIF?!?
Like in the NFL red zone, we’re into the critical hour now. Where losses turn to wins and wins turn to losses.
Only right here its losses turn into massive losses or less significant losses.
The old “230 shuffle” is here. I know what Isaac Newton is thinking right about now.
We talked yesterday about it being a day of position squaring, and adjusting risk post election. And to not read much into it.
Here’s my postmortem aka now I read into it!
Yesterday saw AAPL, GOOG, MSFT and AMZN bounce firmly. Maybe a flight to quality, position, squaring, dealer delta adjustment.
At the same time, NVDA, CRWV, ORCL were still getting caned. So the AI concerns were apparent in that group, but not the mag4 I just mentioned?
That doesn’t make sense. And today it’s even more obvious.
The SMH, the QQQ are the nails still sticking up. Energy is too. I’ll get to that in a second.
But today, SMH and QQQ broke down massively and there’s some liquidation, technical freefall.
I can’t wait to see what happens at 2:30 when the margin clerks pick up the phone.
Energy trades poorly. 6 to 8 months ago, oil was a buy (BofA FMS said 2% saw higher nervy 6-12mos, that was April btw) energy companies were a buy. Today they are still up on the year.
It almost feels like this market doesn’t want anybody, in any sector, to make money this year. That’s why I wonder about the nails sticking up, QQQ, SMH, XLE & related, oil itself.
Reg FD: long cash, long some inverse tech, nibbled some staples, long MO, PFE, BG, CPB
Stay vigilant!
@gnoble79 @davevermilion @JackFarley96 @lighthousejerry @ArturoVandelayI @DougKass @TgMacro @tomkeene
Not for nothing, last time a
republican president lost the midterms like DT, in his 2nd term, was 1986 Reagan.
What happened in 1987?
Everyone needs to think about today as a risk unwind reaction.
What I mean is the market makers that facilitated any and all election related trades are now unwinding all of their hedges.
The event happened. Some call it a market clearing event.
The only thing that cleared was the uncertainty of the actual results.
Traders were hedging against results. Now, volatility in that event is gone. So that component of the options landscape made an abrupt move today.
Everyone has to adjust their Delta. That is what you were seeing today.
Look, the Democrats are less data center and AI friendly generally than the Republicans. All you need to do is look at Trump and think where he was leaning for the past few years.
You see Tesla and Palantir getting hit this morning. Those are his people. And this morning they’re getting a haircut.
The entire market is getting a haircut this morning, one way or the other, based on the events of last night.
I would consider today’s action relief rallies, one way or the other.
When the dust settles, the Fed is still likely to hike in December, the AI bubble is still a thing. Oracle just reneged in Tencent this morning.
Stay vigilant IMHO.
@gnoble79 @TgMacro @davevermilion @lighthousejerry @ArturoVandelayI
Pretty soon you’re talking about a lot of money, rising rates, with a hint of leverage….
@gnoble79
AI bubble no change.
Hawkish fed, no change.
Hard to see the “all clear” sign, tbh.
And y'all think that this election is a "clearing event" according to @Scott_Rubner
Clearing event for what?
YTD and past 6mos
GOOG -11%, -27% (sell?)
AAPL +19%, +14% (nail sticking up?)
AMZN +8%, -9%.
NVDA +11%, +6% (still holding)
TSLA -9%, +4%
META -7%, +1%
QQQ +11%, unch
SMH +45%, unch
XLE +49%, +12%
Takeaways
MAG 7 wounded, not full red yet.
Leaders being sold, profit taking or rotation?
Capital from former leaders to energy, semis?
Oil plunged pre election, pre Iran strikes?
Today Trump says, "No aid to Israel by year-end," day OF elections!
Dems gain Congress = lawfare, investigations, gridlock.
Republicans hold = less Trump restraints, greater teeth gnashing from Dems/DSA
2yrs left in Trump, no more referendums at ballot box. Lame duck on steroids?
Question: Broader risk off or more rotation?
As a reminder, if anyone wants to brush up on their Japanese, today’s market is the epitome of what we call Asa Dachi.
Monday mindset:
1) if you’re not looking at the overnight crude oil move askance ahead of the midterms, what’s your logic?
2) which side politically speaking, has a greater chance of seeing “behind the curtain drift?” what I mean is which side has a greater chance of saying something publicly and then changing their vote when the curtain is drawn? This is why a guy like Nate Silver. It’s much less accurate recently.
3) basically two months left in the Trading year. Metal stocks, and the miners have been for sale since late January. These are tax loss sell candidates. I would find it very odd if the trend in that space abruptly turned in the final two months.
4) rising tide lifts all ships. Falling tide brings down all ships. The mag 7 names have been getting crushed. We have more due this week. The action and reaction after these announcements have not been great. I am curious if Apple can break this trend.
@gnoble79 @davevermilion @lighthousejerry @ArturoVandelayI @TgMacro @DougKass
“Did you use AI?” Gets asked like it’s an accusation.
Nobody asks “did you use Waze?” when you show up on time. Waze is AI.
The tool is becoming free. What you do with it isn’t.
I use AI every day. I also think it’s becoming a commodity.
This week:
Microsoft offered buyouts to ~60,000 employees, then raised $25B in bonds for AI 3 days later.
Alphabet -13% on the week.
Amazon $265 → under $230 in 10 days.
CoreWeave CDS at a record.
AI is a commodity. The financing isn’t.
Full piece, including why this looks like Global Crossing in 2000, where the leverage is really building, and what would make me wrong:
levelwiththemarkets.substack…
INTC update.
Out w the rest of it. Avg price high 20s, selling tag ends 90+.
Love it when a plan comes together.
Now what?
2yr horizon trade idea:
Long $INTC, short $NVDA, $ for $
Nvidia priced for perfection.
Intel priced for defection.
If semi capex went to zero, INTC down some, NVDA down 50-75%
If capex flat, INTC unchd, NVDA down 20-30%
If capex up 10-15%, INTC up 10-15%, NVDA flat?
Other factors: govt in w INTC, cd trump tell folks (AAPL, his new BFF) to buy INTC (who knows, def wd not put it past him.)
Opinion not advice.
#intc I am 50 bid now. I’m not catching the falling knife. I’ll pick it up off the floor. The irony here is my tweet above was from mid April. Anybody who bought Intel from late April onwards is now a loser in Price. When do those tax loss sellers come out of the woodwork? They only have about two months left.
My two cents from yesterday’s Kevin Warsh event:
Mentioned inflation > 5x.
Said “strong” > 2x.
“Prices” including energy & px stability > 4x.
During the presser, it sounded more hawk than dove (per usual for him.) At the time the mkt didn’t react.
In the shoulda, coulda, woulda world I thought about shorting QQQ. But didn’t. (To know and not act is not to know!)
Sure enough Google bombed, NOW too, and I hate reacting after my initial instinct was right, but thinking about a toe dip here leaning on this.
My reasoning: after next week, a lot of the guard rails are removed.
Current administration, take your pick at the bloviator but OMO (mkt/mouth) loses its luster here. There’s far less reason after the election.
In addition, trends that have persisted for the first 10 months are unlikely to end in the final two. Anyone who watches markets historically, count me in that group, knows if a market goes one way for 10 months of the year, odds favor it continuing into the end of the year.
People get fed up with their positions that haven’t worked, that’s why tax loss selling is a real thing
Gold, Silver, metal miners have been mostly for sale this year
Ironically, it started when Kevin Warsh was appointed in Jan.
That brings me full circle.
Little Warsh said yesterday was dovish. And unfortunately, the entire market is hoping and praying for that. That’s the free, easy money (leverage) addled.
With the political shackles removed, and Kevin Warsh still who he is, it’s not silly to raise cash for the next two months, keep some dry powder.
I’m in some commodity related, focused on energy, I don’t think the Iran situation ends anytime soon, and who knows what Donald Trump will do now that scorched earth potentially is here and his DGAF meter just spiked again. What’s he care? He’s got two years left in his cash grab.
In a parallel corollary, Microsoft is laying off 60,000 and they’re at the same time is issuing 25 billion in debt. If that isn’t the epitome of the AI bubbly garbage we are seeing, I don’t know what is.
AI won’t affect workers or the economy drastically as Microsoft fires everybody and raises more money for the AI circle jerk.
I know enough to know I’ve seen too much.
Tread carefully. Hope is not strategy.
@gnoble79 @DougKass @TgMacro @lighthousejerry @dailydirtnap @ArturoVandelayI @davevermilion @tomkeene