To The Moon

Nvidia Corporation CEO Jensen Huang warns that “we're still several years away from getting an AI we can largely trust” and that pre-training the models is not enough to solve the problem. The implication is that the Gen AI is not ready for a broad adoption, and it's unlikely to be ready anytime soon. Thus, the economy is unlikely to get the promised productivity boost, and the earnings for Gen AI tech mega-caps are likely to plummet as the Gen AI bubble bursts. Investors should sell the tech-heavy Invesco QQQ Trust ETF in response to Huang's warning. Chip Somodevilla Huang's Gen AI warning NVIDIA Corporation (NVDA) CEO Jensen Huang was in Hong Kong over the last weekend, where he received his

Scott Bessent, Trump's nominee for US Treasury Secretary, has a grim view of the current market environment, citing bubbles in stocks and real estate. Bessent blames the Federal Reserve for these bubbles and advocates for significant reforms, including stripping the Fed of its regulatory powers. He argues that the Fed's ultra-loose monetary policy has allowed "zombie companies" to exist, contributing to a broader misallocation of capital and productivity slump. Bessent's nomination suggests Trump's willingness to accept some near-term hardship to ensure long term prosperity, which suggests a deep drawdown in the S&P 500. Drew Angerer Bessent's grim views Scott Bessent is the Trump's nominee for the US Treasury Secretary. He is currently a global-macro hedge fund manager. As a global ma

I believe the Fed is expected to make a major hawkish turn in December, revising the SEP projections for inflation, unemployment, and Federal Funds rates. In addition, the Fed is likely to pause the normalization policy in December. The S&P500 fell sharply when Powell warned that the Fed is "in no hurry to cut", and the selloff is likely to accelerate as the December FOMC meeting approaches. Kent Nishimura/Getty Images News The premature September cut The Fed started the easing cycle in September with the jumbo 50bpt cut, and followed with another 25bpt cut in November. The easing cycle started in response to the weak July

The post-election high for the S&P500 at 6017 could mark the top of the recent parabolic melt-up. The triggers for the upside are diminishing, while the triggers to the downside are gaining importance. Given the valuations and the macro situation, it's prudent to sell at these levels, even if the price exceeds the 6017 level. DNY59 The top? The S&P500 (SP500) rallied after the election cheering the Trump victory, and the rally topped at 6017 intraday on 11/11, and closed just above the 6000 level at 6001, which was the new all-time high. The question is whether

Russia has changed its nuclear doctrine, which increases the risk of a nuclear conflict. Broadly, the global geopolitical situation is escalating and the probability of a wider conflict is increasing. Over the next two months, until the Trump Administration takes over, Gold is an appropriate hedge. VladK213/iStock via Getty Images Post-election geopolitical escalation I warned about the post-election geopolitical escalation. However, my primary warning was about the Israel-Iran situation. Specifically, I expected that Israel would take the given opportunity and attack Iran's nuclear and energy infrastructure. The nuclear Iran is

The Fed opened the door to a potential pause in December, as it upgraded the inflation outlook. The Fed has a window to reevaluate the data in December with the election behind, before Trump takes over on Jan. 20. TLT is likely to continue to fall as the 10Y yield approaches the 5% level, limiting the Fed's ability to normalize interest rates. Drew Angerer The ETF that tracks long-term bonds (NASDAQ:TLT) is down by almost 10% since the Fed cut in September as 10Y yields (US10Y) increased. TLT is likely to keep falling as 10Y yields increase towards the 5% level. The rising 10Y

The Israel-Iran war is likely to escalate now that the US elections are over. As a result, if Israel strikes the Iran's energy/nuclear infrastructure, the price of oil could spike and trigger a stagflationary shock, like in 1974. Thus, the S&P 500 is still facing liquidity risk due to the geopolitical escalation, even as the US election risk is eliminated. theasis/iStock via Getty Images The liquidity risk(s) The stock market was facing the liquidity risk due to two interrelated events: 1) the possibility of a contested US election, and 2) the possibility of geopolitical escalation, with Israel striking the Iran's nuclear and energy

The US-China decoupling is likely to accelerate under Donald Trump's second term. The Chinese economy is now more vulnerable than in 2017 during Trump's first term, which makes the situation more uncertain. The Chinese stock fund iShares China Large-Cap ETF is likely a value trap, and investors should stay away from it, from the long or short side. Chip Somodevilla/Getty Images News Trump's second term Former President Donald Trump is now the president-elect, and he will start serving his second term on January 20th. The Republicans have also gained control of the Senate, with a good probability of retaining

The Fed is expected to cut by 25bpt on November 7th, but the actual policy action could depend on the unfolding political and geopolitical situation. The Fed could be forced to cut more aggressively in case of the flight to safety or even consider hiking due to the geopolitically induced energy shock. The S&P 500 could be facing a deep 20% drawdown, but also a V-shaped recovery as the VIX peaks. However, if the unfolding situation causes a recession, like in 1974, the S&P 500 could be facing a 50%+ extended bear market. Drew Angerer/Getty Images News The FOMC November meeting The FOMC is set to meet on Thursday, November 7th, and the market consensus is that the Fed will cut by 25bpt, which is confirmed by the odds implied from the Federal Funds futures. There is

The S&P500 is facing the risk of a contested election, as the odds of Harris' victory increase. The resulting liquidity shock could cause a deep drawdown, but also a V-shaped recovery assuming the event does not trigger a recession. However, the likely post-election geopolitical escalation could cause a stagflationary shock like in 1974. mphillips007 Odds changed in favor of Harris victory I discussed the election 2024 playbook on October 26, but there have been some major changes, and the playbook needs to be updated and fine-tuned, with the additional focus on the post-election period. The major update is that the odds of who will become the next President have changed significantly. On October 26th, th