Permanent Bears are Mentally Ill
Growing up in the 80s and 90s the go to movie for wanting to be on Wall Street was Wall Street, starring Michael Douglas. As a wee lad from the sewers of Brooklyn, there was much to like about Gordon Gekko — doing deals with the young Bud Fox — a classic tale as old as time.
Fast forward to this generation’s inspiration, we have The Big Short and Margin Call, two movies which gave a whole generation of aspiring Wall Streeters brain damage. Everyone wants to be a bear — because OMG “it’s a bubble”. For fuck’s sake, I want to take these people and drown them in vats of hot oil (just kidding, only a joke!). Oh and the other movie to inspire the youth is Wolf of Wall Street, a wondrous tale of a fucking scam artist drug addict doing funny things, so that makes all of his crimes perfectly ok. The former owner of Stratton Oakmont is now a celebrity, teaching the next generation how to truly sell pens.
On Friday, professional and career bearshitter, Jeremy Grantham, was 100% poleaxed by none other than CNBC’s Joe Kernan for stating facts. Jeremy has provided people with RUINOUS advice for a generation because he is a miserable piece of shit. Why bother spreading this sordid brand of refuse, when you can just fuck off instead? Watch until the end.
Late Friday night Apple said they would appeal to the WH to be able to purchase memory from China’s CXMT. First of all, the yields on CXMT chips is said to be in the 50-80% range, compared to Micron or SK Hynix’s 95%. And even if Trump did allow it, CXMT cannot fulfill the gap needed to meaningfully reduce memory prices.
Dylan Patel from Semianalysis (the world’s largest tech newsletter) agrees.
This brings me to my point. The only way this memory shortage goes away is collapse of demand or increase of supply, obviously. It doesn’t fucking look like demand is going to collapse any time soon, so the latter will need to suffice. If the Trump administration wanted to jawbone about something it could be an expedited path to build more semi fabs. Either way, that’s what is needed, more capacity. When this happens, this will benefit the same construction stocks that have been spinning higher for the past 2 years, and the steel and concrete providers, the electricity and the plumbing firms. But at the core of building out memory capacity are the semi cap equipment names.
You cannot increase capacity without the materials and services of ASML, KLAC, LRCX and AMAT, period, end of discussion. There are smaller cap names that will also profit too, but I do not delve in the sandbox of profligate degeneracy.
On Friday we saw a stark rotation out of semis, AI plays and into everything else. You would not know it looking at the indices, but more than 70% of stocks were up. Of the sectors that were down, their YTD returns are +32%. The sectors that were up sport a YTD return of +4%. In other words, all of the ignored areas of the market participated, which is a good thing.
The play there is based off the collapse of oil, which in turn will drop core CPI and eventually rates. We need to think 3 of 4 steps ahead here. If the consumer is back, they’ll be heading on over to RH to buy $20,000 side tables in no time at all, ALL ON CREDIT via COF or AXP.
Travel stocks are most sensitive to the consumer feeling their oats, seen in stocks like EXPE, TRIP, UBER and ABNB.
This post is getting long, so I will wrap it up here. For many years the bears have stated the “entire market was being jimmied higher by just 7 stocks”, and yet here we are with the Mag7 down 8% YTD and everything else up. The SPY is +7.3% for the year, in spite of MSFT -23%, AMZN -0.15%, TSLA -15% and META -16%. Markets find a way. You just need to stop being so damned lazy and do the work.
Good day.
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