Only the War Matters Now
For the month, the NASDAQ is -7%, yet the SPY is down just 1%. Peering into the carnage, many of the recent gains since April have been revoked, especially in the AI trade. Since SPCX came public, its shares have been lit aflame, -33% for the month. Morgan Stanley put out a note saying at $100, shares of SPCX value its AI division at zero.
Other notable drawdowns for the month include:
TSLA -26%, MU -20%, INTC -34%, AMAT -25%, LRCX -25%, ORCL -21%, ARM -27%, KLAC -30%, SNDK -37%, IBM -24%, MRVL -35%, GLW -42%. The list goes on and on with more than 140 names down 20% or more for the month.
On the other hand, rotation lovers have taken to other areas of the market. Notable gains include:
AAPL +15%, XOM +15%, CVX +18%, RTX +12%, BABA +17%, TMO +13%, UNP +13%, ABT +13%, WELL +11%, EQNR +28%, ACN +17%, CME +15%, ROST +12%.
In other words, investors (algos) didn’t really take money out from stocks — but transferred them elsewhere. This is the olde classic 2000 dot com blow up rotation. But are we there now? Google just announced an increase in their capex. Numbers out of INTC were stellar, same with GEV. Unlike 2000, this isn’t held together by secondary offerings in the market or IPOs to finance new orders to CSCO. The vast majority of the capex is in fact backed by the full faith and credit of META, GOOGL, AMZN, MSFT and NVDA.
Having said that, high beta strategies are now off close to 20% for the month, which once again serves as a timeless reminder to not keep all of ones eggs inside one little basket and to diversify, good Sirs.
Along that train of thought, I think it makes sense, almost mandatory thinking, to hedge an AI basket crossed against the people who are spending the money: spenders v vendors. For much of July, Mag7 stocks did very well — based off the notion that capex might stall. They traded inverse to the semis and fiber favs. When Google announced no such thing existed in their minds, markets took it down and initially bid up the vendors, up until the oil scare hit and sold all of the risk down again.
To my point: nothing in this tape matters now other than the fucking Iran war. If it doesn’t end, oil goes higher, so do rates, and down with equities. It really is as simple as that. It also does remind me of the COVID lockdowns when we knew if things didn’t open back up — everything quite literally would crash and they did for a period of time until record reflation. Alas, the world did not end. We will not get stimulus this time around — but if these bastards can end the fucking war that no one wants we can see commodities walked down, in turn the CPI — perhaps paving the way for a pleasant 2nd half.
Trading and investing is hard enough without having to deal with non stop chicanery by our government. But this is where we are now — trapped in hades with madmen.
Speaking of which, I saw The Odyssey yesterday and strongly advise you do so too, in spite of what some conservatards are saying on X. Yes, some of the casting is off and I am sure Nolan is “super woke”, but the story is eternal and it brings forth a message that needs reminding, which is to uphold honor and dignity and not break the sacred bonds between men.
For my entire life I’ve always viewed the Trojan Horse as a clever and ingenious device to win a great battle. I was taught this in school and never gave it a second thought. But was it, really?
Virgil wrote about it in the Aeneid as being a treacherous trick by the Greeks, which led to the famous quote “I fear the Greeks, especially those who bear gifts.” Soon after the Battle of Troy, the Bronze Age COLLAPSED and the world slipped into a dark age that lasted for 400 years, with people forgetting how to read and write — passing along this story by word of mouth until Homer took to his quill.
Until next week, good luck.
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