Bond Curves Flatten Nasdaq
Nvidia what's up with CoreWeave?
Well we knew the Nasdaq was eventually going to have to recognize the waves and waves of US Treasury selling (yields higher) that have inundated the US bond markets lately. Today saw the Nasdaq drop 130.75 ticks today. The markets continue to be pressured from all fronts, energy inflation, higher for longer, stronger US dollar and the US curve was flattened once again today with the 2Y +6 basis points:
We just updated our data for the August FRB SOMA holdings and we continue to see additions in the very long end with sales concentrated in the 5-10Y sectors:
So maybe the flattening is also being pressured from this runoff or QT from the FRB. We know a lot of this FRB run off has been supplanted by the uptake in the FHLB advances and is clearly evident in this next chart. We added a few yellow highlights to see if you can tell at which times leverage was being purged (negative carry) and higher short rates were laying down the gauntlet on over leveraged participants, finally leading and building to a spectacular recessionary crescendo and subsequent equity valuation reversions:
No this time will not be different, do not be fooled by JPowell and Goldman Sachs calls for a soft landing…no this will not be the case, it never was going to be the case, we know it and they know it. Sorry you can’t have $33T in US debt paying 5% plus and not expect some sort of collateral damage. Yes we know why they are doing it, we know the US Dollar is their key product and they will be damned if they are going to let some desert oil digging economies and commies form a conglomerate to compete. There will be hell to pay by the BRICs and its in this higher US Dollar rates of interest that is the delivery mechanism of that pain!
Ok we aren’t going to complicate things here, there is a lot in the works and risk is not being properly quantified, we get it inflation running at 3.5% with a 5.5% Fed Funds rate is a real rate of 2%, sure…yet we all know this is not the real rate of interest and we know the UAW and all the other higher salaries required unions recognize this and will look to renegotiate or strike…none of this is good for the overall prospects of economic efficiency and price stability. All of this is coming at a time where we can tell risk is not aligned with the chips being pushed into the MegaCaps as the safe haven vehicles of choice. Somehow we are kind of astonished that investors aren’t plowing into 6% annualized T-bills and forgoing equity based long only risk…we suspect that once the equities do turn hard and move lower, bonds will stabilize and bids will flow fast and furious, we just aren’t there yet.
Alright so let’s look at where everything settled today:
We are starting to get used to the board being virtually all red aren’t we? As far as the GFBP positions tracker, no changes today:
When we look at the MEGA8s we can see everyone was down but Berkshire and Nvidia is the weakest link and that really shouldn’t be a surprise given all the speculation surrounding CoreWeave. If you haven’t heard of them well you soon will…
We don’t push stories until they are proven viable and not speculative but word on the trading street is that CoreWeave an AI company has pushed Nvidia orders with fake clients, some are even saying CoreWeave is itself a creation of Nvidia and Blackrock so this will certainly be something to continue to watch. You know the old adage, “Behind every great fortune is an even greater crime,” well this may just turn out to be one of those spectacular Enron type events…will see.
Till next time, continue to share, like and subscribe to support our work, we will put out a trading psychology note tomorrow to continue our learning. This is one of our goals to support your learning, to give you advice on the things that matter, to the psychology of trading chaotic market places in hopes that you are able to decipher some of your own skillsets, refine them so that you too can become a more profitable and better investor and trader. Stay with us and we will do our best to provide insights that you might not find anywhere else and we thank each and everyone of you for your support!
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