Total stagnation before inflation – but luckily the market KNOWS how to have fun

We’re not going to lie, Monday May 13 will not go down in history as the most exciting session of the year. The indices all ended more or less unchanged and no one dared to take the plunge while waiting for the CPI figures. This afternoon we will already know a little more with the PPI and Powell who will speak, but apart from that, yesterday’s session was more of a meditation session than anything else. The problem is that when NOTHING happens, the market gets bored and becomes stupid. This is also why yesterday we saw the resurgence of “SAME STOCKS” and the word stupid is by far not strong enough to summarize what happened.

The Audio of May 14, 2024


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The return

The good thing about sessions like yesterday’s is that we realize that even if things have already happened in the past, even if we have already yelled at the Although it’s “completely stupid and absurd”, we are more than capable of diving back into it head first at the first opportunity. And what happened on the “meme stocks” during this Monday allows us to realize that, regardless of the financial events of the past, regardless of their consequences and how it ended, the market is still as stupid as ever. , he learns nothing and he forgets absolutely everything. Which immediately allows us to draw a parallel between the internet bubble and the AI ​​bubble – when we say that it is not the same because it is different and that, as a result, the crash is impossible – when we see what we see, we can largely say to ourselves that we should not bet too much on the fact that it CANNOT happen again. I would even say that it MUST happen again, otherwise it won’t be funny.

So, this weekend, the guy who calls himself Roaring Kitting and who had been THE face of the MEME STOCK craze three years ago, reappeared on social media posting a drawing of a guy who is sprawled in his chair playing on the console and suddenly getting up and another video of Hugh Jackman waking up in Wolverine with a montage that makes a cat appear on the heart monitor. These two “posts” without explanation worked as if Red Bull had been injected intravenously into all the traders and everything that is supposed to have the profile of the SAME STOCK literally exploded.

Definition

I remind you that to be a SAME STOCK, it is important to be a company that is not worth much with pathetic financial statements (at least temporarily) and that most of the “HEDGE FUNDS” are “SHORTS” on the title. From then on, the “community” of MEME STOCK TRADERS will pounce on the options linked to these securities, buy “out of the money” options which are worthless and force the “market makers” to cover their positions by buying mountains of titles. Suddenly, the stock goes up, the SHORTS have to hedge, the volatility explodes, the “market makers” are overwhelmed by the purchase of calls and the process repeats itself, it’s the “SNOWBALL” effect and we become completely stupid or completely stupid, it depends.

As a result, here are the performances of what we qualify today as SAME STOCKS:

1. Gamestop: +110%
2. AMC: +25%
3. Reddit: +15%
4. Spirit Airlines: +15%
5. Lucid Motors: +13%
6. Rivian: +10%
7. Nio: +10%
8. ContextLogic: +9%
9. We can still add Tesla which suddenly grew by 5% before dropping again to end the session up only 2% – perhaps that is still too big to handle.

In any case, today alone, “memes” have officially gained more than $10 billion in market capitalization. Over the past three weeks, these stocks have gained nearly $25 billion in market capitalization. All that, on wind and no valid fundamentals. Just the return of an idiot on social networks was enough to trigger a new madness. And the worst part is that it’s definitely not over. Most financial media warn readers that all of this makes NO sense and that, as we have seen in the past, when the wave of madness recedes those who were last to enter the game of the plane will end up naked. Like those who bought GameStop at $120 in 2021 – and surely via options that have expired a long time ago – and like the Hedge Funds who have made a business of selling short securities that are more or less destined to decline. bankruptcy. Hedge Funds which, yesterday, would have lost billions of dollars, while the madness of the buying volumes even caused the E-Trade platform to crash.

As someone else said, we are living in wonderful times. And as Michel Audiard also said: “Assholes dare to do anything. That’s why we even recognize them “.

During this time

While social networks were getting excited about the SAME STOCKS and GameStop took 118% and once again entered the 600 largest American companies, the rest of the market was replaying last Friday’s match wondering what to do with the figures of inflation which will fall on us this afternoon in the USA and this morning in Germany. Roughly speaking, we should expect a slight deceleration in inflation – especially in the CORE section and if this is confirmed, we should see an avalanche of comments land in the media announcing that “finally, the FED will lower rates in September.” Currently, 63% think so and whatever happens this afternoon, we should witness a new turnaround from economists who will explain to us through A+B that “this time, they know” .

After having already known in November 2023 that rates were going to fall perhaps already in December. Then they explained to us in December that it would be more in March and that there would then be between 6 and 8 drops before the end of 2024. Then, they came back in February to tell us that it’s not really sure in March, but that We are almost certain that it will be in May. Then in March, we were told that May was not certain, but on the other hand it was practically confirmed for June at 96%. In April we began to understand that June would be complicated, but on the other hand September, October and December were as obvious as the nose in the middle of the face. AT THE END OF APRIL, we were saying to ourselves that if it dropped once in December that wasn’t bad, but that it was more in the realm of certainty. That was BEFORE the FOMC Meeting on April 30 and then on May 2 we said to ourselves that a drop in September and one in December wouldn’t be bad. And then, a few hours before the publication of the CPI and the American PPI, we are told that by Wednesday evening, we should know exactly what will happen on rates between now and the end of the year…

I admit that at this stage of the summary, I wonder if there are still two balls of logic, intelligence and rationality in this market. And to be very honest with you, I don’t really want to know the answer. I’m too afraid.

In short, yesterday was calm

In short, yesterday was dedicated to reflection and to wondering what sauce we were going to be served with this evening. And besides, as if we needed to add a little spice to our lives, we will note that between this afternoon’s PPI and tomorrow’s CPI, there is Powell who will speak, just to add an unknown in the equation which already has at least 234… And then after the CPI, there will still be Kashkari, Bowman, Bostic, Mester, Harker and Barr – all members of the FED… We might as well tell you that everything is possible and that it’s going to swing. Personally, I prefer not to be an economist and have to write on the subject between today and tomorrow.

This morning nothing is happening in Asia either, because everyone is waiting. Oil is at $79.23, gold is at $2,348 and Bitcoin is at $62,600. It should be noted in passing that since the return of Roaring Kitty, several “tokens” referring to GameStop or the theme of “meme stocks” have appeared. They of course have no affiliation with the companies, but are just riding the wave. The GME token was up 1,247% yesterday, the GIL token gained 4,000%, while the “Roar” was up 1,800% and the “Kitty” was worth 26 million in a few hours. Be careful of the backlash for those who want to be smart about this.

News of the day

If we have to talk about somewhat fundamental things, we will note that Open Ai should launch a search engine to compete with Google and that scares everyone. Especially at Google. There’s also Melinda Gates resigning from the Gates Foundation – if there was one thing that no one cares about, it’s this. But it’s on the front page of the FT. In the little sentences that we love, there is Ms. Yellen who declared that it was “possible” that the Chinese would respond to the threat of increasing American customs tariffs on Chinese products. It’s the perfect image of Americans – they think they’re the good guys and the saviors of the planet so much that it’s hard for them to imagine that there are people who don’t agree with them and have the secret hope that certain countries love to have their toes stepped on without ever responding. Yellen’s sentence is simply magical.

Otherwise we note that one of the members of the Big Short of the time – Danny Moses – thinks that Tesla will take 70% in its teeth when the “hype of robotaxis and AI” deflates. And then there is also an avalanche of extremely cautious comments that appear everywhere about the American economy and the government’s massive debt, but which no one pays attention to because we are waiting for the CPI and we are look at the SAME STOCKS doing anything.

Numbers side

On the macro side, there will therefore be: the CPI in Germany, the PPI in Switzerland, the CPI in Spain, the ZEW in Germany and in Europe. Then, the PPI in the USA, followed by an intervention from Powell. For the moment, futures are unchanged and GameStop was trading up 20% after close in New York. Never change a winning team !

Have a great day, thanks again to the ever-increasing audience for yesterday’s Webinar. For the rest, we’ll see you tomorrow for new adventures and new crazy performances while waiting for THE CPI and dissecting the PPI!!!

Have a nice day everyone!

Thomas Veillet
Investir.ch

“An investor who has all the answers doesn’t even understand the questions. Success is a process of continually seeking answers to new questions.” John Templeton

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