Following the MEGACAP Tracker

Google BARD, AI in general - use with caution

Subs, we apologize, we found an error in a line of data and had it corrected in the prior posts. We do apologize for any inconvenience and have it now fully corrected and the data is cleaned. We have the updated tracker here for those following along in this heavily crowded trade:

The Nasdaq actually underperformed the Russell2k today and we are watching this chart very closely. As you all know we are onto this heavily concentrated investment thesis by which AI Tech giants have been the only source of market gains and all and every investor is now all in on this gravy train. This is a trade in the futures we watch and here is the June Nasdaq vs short 2 Russell2k contracts:

This single trade alone is up $55k on the year! Crazy train maybe but nonetheless its the obvious theme here now and very, very crowded, if this starts to turn, we would suspect our MEGACAP Tracker to start to give up some ground!

Technically and versus both the R2K and the SP500 the Nasdaq seems to have come a very long way off the Covid lows and we know now, that Tech has become the defacto agent of protection for the never have to sell 1% investors. Here is the 1x1 futures contract of the Nasdaq vs the SP500:

The current level was the March and June 2021 lows and then the July/August 2022 Highs and we are right back at it once again.

Here is a great illustration of how biased the indexes themselves have become as just 7 companies represent 50% of the Nasdaq 100:

As far as the US Bond market today, we saw the yield curves steeper today with the front end hit much less than the longer end which was down 6.6bp on the day and the basis markets were weaker across the board:

We continue to see this battle for 4% in the US Govt 2YR and it seems like a good proxy for a FED FUNDS battle line moving forward for the next year or so. We know the 3M/10s is still heavily inverted and the debt ceiling is causing havoc in the TBill arena, enough so that we consulted Google’s BARD on the subject. Although BARD gave some very wrong answers, to which we had to inform it that it was wrong, it did say that the biggest reason why the Federal Reserve wouldn’t create a program to lend the US Treasury money to avoid the debt ceiling was merely because,

“it would be seen as a violation of the separation of powers between the legislative and executive branches of government.” Google-BARD

Not because of ethics, not because of inflation, not because of fiscal irresponsibility, but merely because of the perception of power…not exactly the wrong answers, just not sure this excuse will hold water…in fact it would probably make sense for the FRB to avoid the calamity and create a program!

Despite BARD being able to utilize real time data, we feel ChatGPT is more advanced in its interpretations and ability to provide accurate results, this is just our opinion, but we found ourselves rebutting its answers to a few things and that is not a good thing when we know less intelligent folks out there will be using these things as omnipotent advanced arbiters of truth, which they most certainly are not!

Till next time…

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