I wrote about AI boom not being a 1999 moment in my quarterly letter, Bespoke comments below.
Bespoke Investment Group In our premium research over the last few months, we’ve done a lot of analysis comparing the launch of ChatGPT and the AI Boom that has ensued with other major technological advances over the last few decades. One of the most correlated periods to now in terms of the Nasdaq 100’s performance was the launch of the modern web browser (Netscape) back in late 1994. Just as ChatGPT brought AI to the masses, the Netscape browser made the internet easily accessible.As shown in the chart below that was included in our latest Bespoke Report newsletter, if we tie the release of ChatGPT in November 2022 to the release of the Netscape web browser in December 1994, the Nasdaq 100 is up about the same amount, and we would currently be around August 1996 on a time scale. What’s interesting about August 1996 is that we’d be about four months away from Fed Chair Alan Greenspan’s famous “Irrational Exuberance” comments that were meant to highlight some of the frothiness that he was seeing in markets at the time.
Those comments by Alan Greenspan turned out to be correct (eventually), but if we expand the chart above out ten years, they were about three years early! As shown below, the Nasdaq would go on to experience a massive bubble for years after Greenspan’s first mention of “irrational exuberance” in late 1996.There are plenty of investors saying the same thing and worse about Tech/AI stocks right now, but keep in mind that we’ve yet to see a pick-up on the M&A and IPO fronts that usually accompany bubbles. Some of that can be tied back to the fact that companies that may have gone public 25 years ago are often getting acquired before they go public, but overall, the AI Boom, while certainly hot, still seems far more subdued than what we saw during peak Internet boom back in the late 1990s.
Of course, every boom/bust cycle is different, and the chart below is not to suggest that the Nasdaq will continue following the path it took back in the 1990s. We just thought it was helpful to see the two periods side by side when comparing the launch of ChatGPT to the launch of the Netscape web browser.As always, past performance is no guarantee of future results!We have a lot more interesting analysis like this in our newest Bespoke Report. If you’d like to read it, simply start a trial to one of our three membership levels.
Fundstrat Head of Research Tom Lee and his team saw an important quantitative signal last week that historically has been followed by strong win ratios for small-caps: The Russell 2000 has been volatile, trading at +/- 1% in 11 out of the last 12 trading sessions. This has happened only 10 times in non-bear markets since 1979 – in 1987, 1998, 2009 (4x), 2011, 2020 (2x). “These were all clear ‘risk-on’ years and more importantly, ‘early cycle’ years,” Lee pointed out. In those historic precedents we found high win ratios for small-caps one-month forward, as well as three, six, and 12 months afterwards. In fact, the historical win ratio was 100% in the three-, six-, and 12-month forward-looking periods. We see this in our Chart of the Week
2. Over the Last 12 Trading Days…13% Spread Between Small Caps and S&P
@Charlie Bilello US Small Caps are up 10% over the last 12 trading days while US Large Caps are down 3%. The 13% spread is the largest 12-day Small Cap outperformance ever.
3. What Will It Take for Equal Weight S&P to Outperform Cap Weight?
Barrons Ben Levisohn Bank of America’s Ohsung Kwon looked at when the equal-weight S&P 500—another proxy for the rotation trade—outperformed the market-cap-weighted version of the index. He found that it did so 90% of the time when the yield on the 10-year Treasury fell a full point from its 12-month high and when the Institute for Supply Management’s manufacturing purchasing managers index rose over four points from its lows. For those two things to happen now, the 10-year yield would have to drop to 3.99% from a recent 4.21%, and the PMI would have to hit 50.5, from June’s 48.5. That seems like a big ask.
Corporate insiders are dumping stock at the fastest rate in more than a decade Marketwatch By Mark Hulbert Corporate insiders have taken a sharply pessimistic turn — selling their companies’ shares at the fastest rate in at least a decade. That’s according to InsiderSentiment.com, a website maintained by Nejat and Jon Seyhun. The former is a finance professor at the University of Michigan and one of academia’s leading experts on interpreting the behavior of insiders. In calculating their insider-sentiment indicators, the Seyhuns focus only on two of the three categories that the law defines as insiders (corporate officers and directors) and ignore the third (a company’s largest shareholders). That’s because Professor Seyhun has found from his research that these large shareholders on balance have no privileged insight into their companies’ prospects. Because their transactions are typically several orders of magnitude larger than those of officers and directors, including them skews the much more valuable signals coming from officers and directors.
The insider indicator that the Seyhuns calculate is the percentage of all companies with any officer or director transactions for which there has been net buying. The past decade’s average is 26%, and up until July this ratio had been slightly to moderately below this average. In the first three weeks of July, however, the insider buy ratio turned “deeply negative” — to 13.6%, its lowest in at least a decade, as you can see from the accompanying chart.
1. FANG+ ETF Closes Below 50Day Moving Average….-11% from Highs
2. NVIDIA Closes Below 50-Day…-18% from Highs
3. AI Stock …SMCI -40% from Highs…
4. Tesla -20% from July Run Up
50day never made it thru 200day to upside on chart.
5. EV Inventory 125 Days
6. Chipotle Closes Below 200-Day
Not sure if CMG, UPS, MCD telling us consumers slowing down spending.
7. Shares Of Major French-Fry Supplier Crash As Restaurant Traffic Slowdown Worsens
ZEROHEDGE BY TYLER DURDEN
One of the world’s largest producers and processors of frozen french fries, waffle fries, and other frozen potato products reported fourth-quarter profit and sales that missed estimates. The company also issued a below-consensus full-year adjusted EBITDA outlook due to sliding global restaurant traffic. This is an ominous sign, as elevated inflation and high interest rates are squeezing consumers. Lamb Weston reported adjusted earnings per share of 78 cents for the fourth quarter ending May 26, which was well below analysts’ expectations tracked by Bloomberg of $1.25. Revenue also missed, coming in at $1.61, versus the average estimated $1.7 billion. Here’s a snapshot of fourth-quarter earnings (courtesy of Bloomberg):
Momentum activities like public speaking, board sports and leadership all share an attribute with riding a bicycle: It gets easier when you get good at it.
The first error we often make is believing that someone (even us) will never be good at riding a bike, because riding a bike is so difficult. When we’re not good at it, it’s obvious to everyone.
The second error is coming to the conclusion that people who are good at it are talented, born with the ability to do it. They’re not, they have simply earned a skill that translates into momentum.
There’s a difference between, “This person is a terrible public speaker,” and “this person will never be good at public speaking.”
And there’s a difference between, “They are a great leader,” and “they were born to lead.”
The thing about momentum activities is that we notice them only twice: when people are terrible at them, and when they’re good at it. That includes the person you see in the mirror.
Three Lower Highs in a Row for 2 year treasury yields…trend is down pulled back to early Feb 2024 levels.
3. Q2 2024 First Year Over Year Increase in IPOs Since 2021
From Zachary Goldberg Jefferies –Wall Street Horizon noted, the second quarter of 2024 marked the first year-on-year increase in new global #IPOs since Q3 2021 and the single most active quarter since Q3 2022.
4. UPS Stock Breaks Below 2023 Lows
5. AT&T Chart…Can T Break Out of 10-Year Range?
6. De-Globalization Will Not Be Easy
Bernstein Advisors Trade Deficit is at record levels.
8. The US housing-market logjam keeps getting worse
Business Insider
Existing home sales fell in June to nearly to their slowest pace since 2010.
The decline comes as home prices notched a record high in the same month.
Buyers are likely waiting for interest-rate cuts that would loosen financial conditions.
The pace of existing home sales fell close to a record low in June as record-high prices and persistently high mortgage rates turned buyers away. Data from the National Association of Realtors shows that sales slumped 5.4% from May to June, hitting an annualized rate of 3.89 million. That marks the one of the slowest paces since 2010. Adding to the reluctance of buyers was a second straight monthly record for home prices. The median existing-home price surging 4.1% year-to-year to $426,900. The two dynamics are combining to worsen a long-standing logjam in the housing market. While the issue was once a lack of inventory, home sales have stayed stagnant even as more units have come available. It’s likely buyers are waiting for interest rates to start declining.
9. American Mortgage Holders Loan to Value at Super Strong Levels
10. Most Followed Accounts On Instagram…Ronaldo and Messi
Aside from Instagram’s own account, Cristiano Ronaldo has the most followers on Instagram with over 600 million. Another soccer star Leo Messi currently ranks third for most Instagram followers, just over 100 million behind rival Ronaldo. With the exception of YouTube’s MrBeast and T-Series (over 260 million subscribers), each of Instagram’s top 20 accounts has more followers than all other social media accounts. 17 of the top 20 Instagram accounts are focused on a single person.
