This Is Not Investment Advice
Some of the things that resonate quite a bit with me from Investor’s Business Daily include the following:
Do your best to remain flexible
Toss opinions and egos out the window it’s not about what I “think” or “feel” but rather all about what the market is telling us . . . . and it most certainly is not about what I “want” or “wish would happen” . . . .
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I’m still aboard the ‘Melt Up’ from a broad and long term perspective. The Fiscal Stimulus fire has been lit and developed nations have absorbed and/or are in the process of absorbing that they need to defend themselves and grow which also is a form of defending themselves. We also need a lot more energy, power, and electricity. AI and Bitcoin are not going away and will only become bigger factors in my view. However - as stated previously many times a lot can happen in financial markets in 30 days and a whole bunch of things can happen in 90 days.
This is significant reported at ZH:
Here are six things jumping out at me right now that directly relate to the market telling me we are in Risk Off . . . . . plus some options and a Wild Card:
Fed Posture
“Don’t fight the Fed” . . . . is this an intentional attempt at revenge on Trump . . . . policy error in September giving a cut to shut up Trump temporarily . . . . Fed WAY behind the curve as tariffs will likely lower inflation and hurt jobs initially . . . . . just being cautious to punt on cuts for a few more months and cry “we don’t have data because of the shutdown” . . . . . I do not know for sure but I am strongly sensing all of it absolutely destroys the market’s perception for Real Rates one year out . . . . . big change
I suppose Bessent could step in with Gold Reval but I’m not sure what can be done here other than grinding it out until May/June or (and perhaps entirely plausible) the labor data gets so bad the Fed has to go back to moving from Restrictive to Neutral . . . .
Be honest with yourself . . . . they even have the WSJ Fed Mouthpieces out prepping the battlefield and rate cut odds show the market believes them for now . . . .
Tech Credit Spreads
They are wider, it’s a fact
No way I can look past ORCL and CRWV
Yen Carry
After somehow barely moving for months longer duration yields in Japan are on the rise again and setting new highs
There is no magic switch or button pushed to “turn off the Yen Carry trade” suffice to say if longer end yields keep pushing higher it isn’t bullish for Risk On
AI Math
Please consider this post here where I lay out a simple scenario to analyze if or how OpenAI could possibly pay one vendor $60B/year a couple years from now
Yes we are getting “a lot more AI” and “we need a lot more power” but the forecasts and projections are pushing the boundaries of Nominal GDP beyond reason
Dial it back, recalibrate everything . . . my suggestion is to start with a credible forecast (and subtract 25% for Murphy’s Law) on how much POWER we can have in 2028 and then tell us “how much awesome AI stuff” could be done with such a hard stop on Power . . . .
MSTR and OpenAI and Market Trust
Remember now these are only my views and opinions and this is not personal nor have I ever suggested or implied anyone has done anything illegal or even ethically/morally wrong . . . . . a couple events recently have seriously damaged some trust in my view . . .
MSTR formally comes out and says/admits “hey if we get in this zone yup we’ll potentially be selling more securities so we can pay current and ongoing obligations” . . . . . and at the time I stated THE MARKET WILL NOT LET THIS SLIDE and that it wouldn’t like that . . . . ever since Bitcoin has not been able to catch and sustain a bid or Money Flow . . . . . hello ding ding ding wake up everyone . . . . the market is waiting for MSTR to sell . . . .
What can be done . . . . project 350 BPS for the next 12 months . . . . swap a chunk of BTC for Stablecoin and tell the market for how long that interest income can pay the bills . . . . . consider another source of cash flow and I don’t claim to have a perfect answer . . . . need to admit defeat and stop the bleeding you might be surprised how positively the market receives this . . . . industry heavyweights all the biggest names should be working to find OTC buyers to make this offloading as smooth as possible . . . . otherwise the market keeps MSTR cornered and trapped and a lid on BTC until Global M2 shows a very clear trend up on a relative basis
OpenAI tosses a trial balloon out for a government bailout . . . . an admission to the world that their own math doesn’t add up
Run It Hot On The Ropes
This is going to become a huge issue possibly in my view . . . . . the plan was in motion . . . . . get food/energy under control but otherwise run the economy hot pushing Nominal GDP growth acknowledging Core PCE was 3%ish to actually help boost growth even more all of which can help equities significantly along with Cap Gains tax receipts and many other things via Wealth Effect that even Greenspan worshiped . . . . what now?
Wild Card: Private Credit
In my view the entire Private Credit Industry very well may be 90%+ completely legit . . . . . . but what is really going on with that 10% . . . why is OWL tanking . . . . where is the collateral . . . how much fraud
I have no idea what is truly going on here or what will happen but I don’t really like what Weekly Charts are telling me about it . . . .
