Doubtless THE story of financial markets in 2023 has been the astonishing comeback of MegaTech. When rates went to zero during the pandemic, the explosion in Tech valuations made sense both in terms of mechanics and narrative. If discounted cash flows were governed by the 10-year rate, then companies like Apple became something like 100 year bounds. Look far enough into the future and it was hard to imagine how the likes of Apple, Amazon, Facebook and the like could fail. But then the F...

The Ancient Greeks used to say that Phobos, the God of Fear and Panic, ruled the battlefield. We might say the same of FOMO in the realm of financial markets. Even in the face of higher rates, an overblown debate about the debt ceiling and at least the theater of quantitative tightening, speculative fervor has returned once more to the American stock market. 2021 promised a revolution in Blockchain technology, whatever that means. And now 2023 foretells the end of human intelligence for...

Over the past year, the S&P is down just 4%. In the world of equity markets, that is essentially...nowhere...a nothing burger. This on the heels of the Fed's most aggressive hiking campaign in living memory, one that began last March. Doubtless there have been puzzling rallies and plunges in between, a banking crisis, the makings of a bond market catastrophe and the looming debt ceiling debacle. But in the bigger picture, how do we account for the relative strength of the equity market in...

We spend a considerable amount of time on our silly little podcast agonizing over levels in the S&P 500. As we hover below 4,000, is the stock market overvalued or undervalued? Did the market bottom at 3,600 in October? Will this recession bring about the same relative decline as the Tech Bubble of 2001? But it bears reminding that levels are an illusion. Pop open a chart of the equity market over the last 20 years and you can't help but think the run-up is nonsensical. How could we...

The halcyon days of quantitative easing made us all forget one simple truth. That in the annals of financial history, bank runs are numerous and inveterate. Like the coming of spring or another movie from the Marvel Cinematic Universe. Except that the Great Financial Crisis did in practice, if not in law, change the game for all time. There are now 4 unimpeachable megabanks enameled with Too-Big-Too-Fail status and unlimited deposit insurance. And there are all the other banks, to which...

We spend our days trying to guess which way financial markets will go, like medieval alchemists or broadcast news meteorologists. Is the bottom already in for the S&P and all degenerate risk assets? Where will rates go, and for how long? Is now the time to buy bonds? Does it even make sense to pick stocks? But why struggle, when staring us in the face for the first time in our investing lives, is a risk free rate of 4.4%. Plumb any mutual fund money market account from Fidelity or Blackro...

With the S&P dithering in no man's land, we speculate on the implications of ChatGPT and its inevitable imitators. Needless to say it will trivialize the entire profession of data science. But will it become the greatest business-to-business software service in the history of capitalism? Next we discuss the re-emergence of short-dated options, and the potential consequences for market volatility. Lastly we wonder whether or not the zombie corpse of Bitcoin and Crypto assets writ large are...

While the world's putative Illuminati gather in Davos, the S&P fails once more to escape its bear market structure. This in spite of some frisson over Netflix earnings and yet more bloodletting across Big Tech. Meanwhile Finance Twitter has begun to coalesce around a familiar narrative: over the next several years Emerging Market Equities will outperform the U.S. Thus we revisit one of our favorite topics. Will the emerging markets ever emerge? But this time, we turn to ChapGPT for ...

This week with inflation cooling off and the Federal Reserve balance sheet unchanged, the S&P 500 stretched to near 4,000. But Jerome Powell has made it clear that no rally can long endure, not while unemployment hovers near 3.5%. For now the structure of this bear market remains intact. What's more we closed last week with Implied Volatility (VIX) revisiting a 52 week low. All this to say that with another week of earnings looming and a debt limit fiasco on the horizon, all signs p...

We're back after a hiatus worthy of European aristocracy! Tesla, the last great hope of technology optimists everywhere, has at last succumbed to the Great Duration Bubble. From incomprehensible over-valuation to soul crushing underperformance, the likes of Crypto, the ARK innovation fund, Meta and now Tesla have all been deflated in their turn. And why? The Federal Reserve. Once the sponsor of the greatest financial binge in modern history, now the author of the most bloodthirsty tightening...

The lurid collapse of FTX and with it Crytpo sentiment the world over bring to mind an old adage in high Finance. When the tide goes out, we find out who was really swimming naked. And it turns out, in the far off Bahamas, Sam Bankman-Fried was not only swimming naked. He was riding a jet ski that you paid for. What do we really mean? That in the end, the recent mania surrounding Crypto was only sustained by central bank policy. Put that much liquidity in the system, and the frontier of...

Last week, Jerome Powell took the mic. And with the mystic language of macroeconomic policy said the equivalent of: we can't stop, won't stop, murdering your equity portfolio until inflation improves. Makes sense. The last best hope of a near term pivot died there on the podium. Practically speaking, the Fed will be hawkish throughout 2023. And so the S&P 500 lurches onward in No Man's Land at ~3,770. Who will win the day into year-end? Bulls or Bears?

Earnings season began this week with mixed results. And if there are two companies that tell the story of these times, they are Snapchat (SNAP) and Schlumberger (SLB). Snapchat you surely know. Once the darling of young people sending ephemera to each other during lockdown, it is now little more than a glorified penny stock sent reeling from its soaring pandemic-era valuation. A dreadful year for tech, social media most of all, and another dreadful earnings call to mark its passing. Schlumber...

This week inflation came in hot versus consensus. And while we have past the peak of so-called headline inflation, with energy costs abating somewhat, CORE inflation is still accelerating. Rent costs in particular are running wild. What does it all mean? As was, the Fed still has a data-driven license to hike rates with abandon. And in the equity markets, the price action around Thursday's print suggests traders have no conviction about the direction of travel in the S&P 500 over the medi...

Every once in a while, we get to the point in financial markets where all that matters is...wait for it...you guessed it...BOND MARKET LIQUIDITY. In the simplest terms, there are not enough willing buyers to scoop up US treasuries. Or any government bond for that matter. Least of all, as was this week, British government debt. So dire did circumstances become in London that the Bank of England was forced to ease again and become the buyer of last resort. At the death, many pension funds were ...

This week the European energy crisis took center stage on Finance Twitter. Is this right and truly checkmate for Europe? With Vladimir Putin throttling natural gas, and no longer under the pretense of scheduled maintenance, what does the winter hold for, say, German Industry? The Germans might have enough in storage to weather the cold, but what will prices look like for European citizens and businesses? All of this has led to massively negative sentiment. Erik Townsend of Macro Voices ...

With the eyes of Finance Twitter fixed on Jackson Hole, Jerome Powell coolly reminded the investing public that a pivot is not in the offing. And if there is no self evident pivot, then the fever dream that was this summer's bear market rally might right and truly be over. Of course no one really knows as yet whether we're actually in a bear market or a bull market. Such is the divide in opinion around the Fed's actual willingness or ability to remain hawkish. Inflation might be the dragon of...

Last week, the Finance Twitter newsfeed produced an embarrassment of riches. Just to enumerate the highlights: Nancy Pelosi visited Taiwan and sent the CCP into a frenzy The jobs report blasted consensus, making way for more Fed hawkishnessAmazon bought Roomba, completing it's conquest of your homeMichael Saylor stepped down as CEO of Microstrat to work on Bitcoin full timeBlackRock announced it will now offer bitcoin trading for institutional clientsWhich of course bears not at all on t...

What do we make of this rally? Is it a 2005 Donovan McNabb pump fake? That is, a bear market rally? Or the beginning of a pivot to accommodative policy once more? On Wednesday Jerome Powell said, and didn't say, just enough to prolong a run up in risk assets into the weekly close. Why? In short, he didn't say anything that was incrementally hawkish. Crack the window open for those itching to go long, and in the short-run, they will pile in and duly vaporize short sellers. As ever, we re...

This week the Consumer Price Index, the inflation measure that now governs the market, came in higher than consensus at 9.1%. And yet the 10 year treasury yield didn't move. And the equity market chopped sideways. What do we make of this? According to the high priests of the bond market, we've priced in an even more hawkish Federal Reserve in the near term. And thereby a higher chance of a recession later on. In this milieu, the long bond ETF TLT might be forming a bottom. But still t...