NIGHTMARE ON BULL STREET
Last week, like a big dunce, I laid into the bears with my latest missive NIGHTMARE ON BEAR STREET, which I will have you know drew fierce consternation amongst loyal readers for “jinxing” the tape. In other words, my words caused equity markets to slide and slide they did indeud — with momentum stocks tossed into the trash heap in favor of The Clorox Bleach Corporation.
Whilst the NASDAQ is ~7.5% off record highs, the higher beta sleeve is -17%. That’s my high beta index. It’s worth noting the catamites at Morgan Stanley have a much more perverse version of what I have and theirs is down 40% (no fucking idea what’s in that).
“Just 17 trading days into the unwind, TMT Momentum is already down -40% — making this both the fastest and deepest selloff at this stage on record. The previous worst, in early 2021, was down -29% after 17 days.”
It’s always “the worst collapse” since the last one. At the center of the carnage are the semis, now off 21% for July, -10% for the past week alone. All of this angst, coupled with the renewal of the Iranian war, have investors on edge.
Aside from ordinary profit taking, the semis have been subjected to several risk off factors, one of which is the resumption of the software trade. The single best thing for the semis would be for INTU and ADBE to collapse under the weight of its own stupidity. The fact that AI isn’t viewed as deleterious to SAAS recently has caused allocators to treat the sector as a counter correlating factor to AI, same with the fucking hyperscalers.
We now have a market that is totally schizophrenic, with Mag7 rallying hard due to potential (imaginary) capex cuts and semis and everyone else falling by the wayside into the gates of hell.
This week we have numbers out from GOOGL and GEV, which should enlightened us plebs as to the ongoings inside datacenter land for the next 3 months. All in high beta strategies are down in the area of 20% MTD, crossed against record margin debt and into the backdrop of renewed war and higher oil prices. All of this is not bullish, obviously — but these grim and dire tapes often lead to face ripping rallies of a monumental magnitude. We have all seen the data of “missing out” on the best 10 trading days of the year and I can tell you from my experience — those days are rarely forecasted and usually occur at a time when things look like absolute shit. Because of this, many tactical traders tend to miss out on those days — either being hedged or cashed up.
My 2 cents on all of this is to remain the course, however do not do so in a wanton degenerate manner. You do not need to make all of the money right away. Try some diversification methods and perhaps a cash reserve to buy dips. Most risk oriented traders have not been too diverse the past few months, because most, if not all, of the gains were concentrated in those areas of the tape being burned alive now. However true, try to maintain investments in other areas outside of AI datacenters for the off chance things continue lower for a bit longer. We can never know for sure when these squalls end and they usually do end after the last bull is sick and tired of waiting for a bounce. Knowing this, prepare your minds for volatility and if you have some core convictions — perhaps stick with them but not to a degree that you risk the franchise over it — if you catch my drift.
On a personal note, we just got back from NYC — truly a hellscape of a city in the summer. We brought back my wife’s Mother and Sister to stay with us for a while and to get a better sense of their medical conditions, both appear to have signs of dementia and in the case of my Mother in law — she needs physical therapy. They are family and they’re old now, so we will take care of them.
Eat well and exercise often and cherish the time we have in this beautiful place.
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