🗞 Liberation Day 2.0

WHILE YOU POUR THE JOE… ☕️
Accounting Shenanigans

Remember when Elon Musk and Trump had a very public fight?

It was mostly about the “Big Beautiful Bill” that Trump was floating and is now about to pass.

This bill effectively undoes any and all progress made by DOGE back in the day, and puts the US in an even worse trajectory in terms of debt and interest payment spirals.

I don’t think this is a good thing, especially as Moody’s already downgraded the US credit profile. 📉 

I think that poses a tailwind for a few assets, and a headwind for most.

Speaking of big and beautiful, let’s get on with today’s email 📧…

PARTY LIKE THERE’S NO TOMORROW
Where’s the Music Today?

Remember the guy who bought the Dot Com bubble tops during 2000 and then was called in to Bloomberg live after becoming a billionaire?

Yeah, me neither. 🤷‍♂️ 

And there are tons and tons of investors buying long-only strategies in stocks when they are literally approaching the tops.

Even worse, valuations today are much much worse than in the Dot Com bubble.
But that’s besides the point.

We still caught the following:

The commitment of traders report is a clear sentiment corner right now for the S&P 500 futures.

Commercials (the most important to watch) are now unwinding though till in a top quantile position, so no reason to panic just yet, in terms of analogies the music is merely slowing.

However ⬇️ 

By the time the music stops, most of these long-only investors will likely feel the pinch in their portfolios, and then the worst part comes in.

They will likely sell out during the panic and pain, regretting the decision for about 8 years into the future.

Don’t be part of that pack, learn to hedge and make money in BOTH bull and bear markets.

Join the Sovereign Trader Program. ✅ 

Broken Pistons

Goldman Sachs now expects the S&P 500 to report 7% EPS growth, which is a revision lower than where it was one quarter ago.

I seriously believe they are still overstating this growth trajectory, unless they are considering the S&P’s current deadly concentration:

That’s right, if this 7% EPS growth is 38% driven by the outsized growth in names within the Magnificent 7 and other hot names in the S&P 500 today, then I think we’re in for some disappointment. 📉 

In a nutshell:

• PMIs are weakening consistently

• Inflation is falling due to consumers tapping out, businesses slowing new orders

• Liquidity is tightening at record times since the Dot Com bubble

• The 10s / 2s Yield Curve is now in the same 2008 trajectory

This all makes a cocktail of bad data that will likely turn in a disappointing GDP figure. 🐻 

By the way, the latest revision showed GPD was actually -0.5% for the quarter…

Genuinely, everyone is starting to find this is the reality we’re facing.

The “Hard Data” is now starting to reflect the narrative behind the “Soft Data”, which is a fancy way of saying all of the leading indicators I pointed out are now going to be reflected in the lagging indicators like GDP.

Real talk: ⬇️ 

How do you expect the S&P 500 to turn in 7% EPS growth when the 10yr is now 4.3% and inflation is only 2.2% on an adjusted basis??

Let me make it simple. Money is too expensive, and money is getting too slow, so earnings are not going to be as good as everyone thinks.

Then you have the new bill and its deficit implications.

This is exactly why Trump is fighting for rate cuts so much, the economy is in trouble and so is the debt situation. 📉 

You see, the Dollar Index is dead and way to short positioned, which is the natural state of where we are today.

What’s interesting is that bonds still don’t reflect this state, which makes me even more bullish on this trade than ever.

Not only because the $DXY / $TLT spreads are past the 2022 and 2019 levels, which 100% calls for a new convergence scenario.

But because no matter what happens, I think bonds rally. Thin about it:

• Fed cuts rates, admitting the economy is in trouble (which it is) and that becomes the market narrative = Bond rally 📈 

• Fed doesn’t cut, tariffs increase instead in order to make up for the deficit downfall = Dollar bottoms, Bond rally 📈 

And that is why I call this Liberation Day 2.0 in the making.

Oh, don’t forget that with S&P 500 and NASDAQ 100 at all-time highs, it’s almost time for those tough Trump negotiating tactics to come back.

P.S.

Being long-only and looking for those hot stocks (often buying the top) cost me way more money than it should have.

That issue (and the fix) is within Day #3 of our free 5-day email experience.

▶️ Get Day #1’s Email Tomorrow!

To your success,

G. 🫰 

GO AND MAKE IT HAPPEN
Master the New World

Game theory is the foundation of everything hedge funds and the best traders out there have been able to quantify.

I’ve been spending the summer quantifying my own strategy and version of game theory into a machine learning model AI.

Honestly, today’s book recommendation 📖 inspired 90% of the project, and I hope it does the same for you.

To your success,

G. 🥃