Everyone insisting "there's no AI bubble" is looking in the wrong place.

Mag7 earnings are real.

But the bubble? It's in the hardware arms race - the racks, chips and power builds no one can yet monetise 🧵 2/ The blind spot

Bubble deniers point to massive profitability as proof that "this time is different"

But markets don't break on current earnings...they break when future cashflows can't catch up to the story

🧵 The Great Gold Conspiracy Theory

1/ For years the West has accused China of secrecy. But when it comes to gold, Beijing’s silence may be strategy...defensive or aggressive, depending on your perspective

Here’s what might be the biggest monetary story hiding in plain sight 👇 2/ China’s been the world’s largest gold producer since 2007. Exports of standard bullion from the domestic market are generally prohibited—so most mined metal stays onshore.

What's Happening with Market Breadth & Why You Should Care, 🧵

1/ Market breadth is sending mixed signals right now. While $SPY (S&P 500 ETF - blue line) is at all-time highs, $RSP (equal-weight S&P 500 - orange line) is lagging. Only 53% of SPY stocks are trading above their 50-day moving average (SMA). So, what’s going on? 2/ Here’s the twist: the Advance-Decline Line (a key breadth measure) just hit an all-time high too. This suggests more stocks are participating in the rally than you might think.

The dispersion trade: What is it and why should you care? A 🧵

Per Goldman:
"Over the last 5 trading sessions, the realized volatility for the SPX index is ~15 (0.9% daily move)
Over the last 5 trading sessions, the realized vol for the avg SPX stock is ~45 (2.8% daily move)
This 30 vol spread is the highest since November 2020 (election + vaccine efficacy data) ... this 30 vol spread is in the top 10 going back 25 years (GFC, covid, etc inclusive)" What does this mean, in English?

A 30 vol spread between SPX and the average SPX stock is quite extreme historically and signals significant underlying dispersion in the market.

There is a ton of noise on this app at the moment. To help you cut through that, let me share some key points:

1. Long stocks (esp AI/Mag7), short yen and short vol were 3 VERY CROWDED trades coming into this. Many positioning metrics were at/near the 100th percentile in July. These positions will not get unwound in a week
2. Japan has had zero interest rates for over 3 decades. Plenty of time for Yen carry trades to build up (estimates at $4T). Yen strength is causing a negative feedback loop as stops get triggered and overstretched carry positions get unwound. This is rattling positioning in global risk assets

"Never short a dull market"

Yeah, yeah, I know the saying. But what if this is a zombie market? One that looks dead but is about to spring back to life as a flesh-eating monster?

Anyway, IMO the risk/reward of going short here justifies a position. I'll explain...

a 🧵 1) The S&P hasn't been able to make any progress at the trendline from the ATH. This coincides with the 1.618 extension from the July highs to the Oct lows

I'm not a "macro trader" (I leave that to experts like @INArteCarloDoss @PauloMacro, and others who are very good at it)

I've never held myself out as a macro trader/expert, but I DO study macro. So how do I trade, why do I study macro, and how do I use it? First off, I'm a technical trader. I exploit technical setups that give me a probabilistic edge.

Price is always doing one of 3 things:
- reverting to the mean
- accelerating away from the mean
- consolidating

I seek specific circumstances across these conditions

I prepared a deck to help some of my members understand the #bigflip framework as postulated by @INArteCarloDoss

Sharing here for those interested

1/4

Things I could buy instead of a Bloomberg terminal subscription

1. One case of Luciano Sandrone Le Vigne Barolo, every month 😃 2. A brand new Pinarello Dogma F, every year! 😃

If the dollar is set to rally from here, what does that mean for inflation? A short 🧵

Conventional wisdom holds that if the dollar rallies, US inflation will fall. A good narrative, as the US is a net importer, and imports become cheaper when the dollar strengthens

BUT...
1/8 ...but note how in 2022 the dollar peaked right at the same time as core CPI peaked. Sometimes narratives don't work so well

2/8

The vast majority of the statistics you read regarding the stock market are plagued by small sample fallacy and/or gambler’s fallacy

With that disclaimer out of the way, here’s the “January Barometer” explained

1/4 The performance of the S&P 500 in January has predicted the year’s course with 72.2% accuracy since 1950. “So goes January, so goes the year”

15/18 of pre-election years followed January’s lead

2/4

Since 1928, the S&P 500 has only posted back-to-back negative years on 4 previous occasions

So that makes another down year in 2023 highly unlikely, right?

Well, maybe not (a short 🧵) The first time since 1928 the S&P posted consecutive down years was 1929 to 1933

It happened again in 1939-41

Then again in 1973-74 and again in 2000-02