Ratcheting Higher
The virtuous liquidity cycle, the robotics trade that already took off, and how China is going to fix our spending problem.
As a market speculator, I’ve had the fortune of building out a breadth of knowledge about how the world works. I can get spun up on most topics in a short amount of time due to my experience with my metacognitive abilities.
But there’s some things I’ll never learn. Like a lunar eclipse. How the heck is that different from a “new moon?” And I’ll sit down, watch a video about it, understand exactly how it works, and then three weeks later I’m baffled by it again.
It’s just like these straps:
I’ve used them for my entire life, but every single time I pull these out I’m like an ape operating a spaceship.
Once I figure it out, it’s like the mysteries of the universe unlock about how a ratchet works. And then I put them away and forget which way to thread the strap.
The market is ratcheting.
While degen stocks ran hot, the Mag7 names were rangebound. Now that the latter have broken out, other former hot spots in the market have seen contraction and new bases built out.
I’m not talking about quantum or nuclear. Many of them are just a few weeks removed from their parabolic unwinds, like OKLO:
But there’s other names, that have been basing out from the first big summer rally, like JOBY:
Don’t be shocked that another round of leveraged liquidity starts to jam into names that have a similar structure as JOBY. Look for names that are up over 100% YoY, then haven’t had a hard run in a while.
I still keep looking for equity momentum to falter, but large caps just keep a bid in everything. When the VIX spikes on a Friday on a debunked report on Venezuela, it resets hedging (again) in indices, and the continued unwind of the vol complex allows marginal demand to show up across the board.
Until that changes, trend’s still up.
The Next Move For Gold
… isn’t one.
Gold experienced a squeeze on multiple fronts. You had the traditional short squeeze, which started slow at first and then finally accelerated into a gamma squeeze.
Structural demand is going to stick around at the sovereign level, especially China.
Combine those two, and you’ve got the recipe for a new range to get knocked out for a while. Which is what gold tends to do— it trends hard for a few months, then goes into a range for a lot longer than what’s priced in.
If GVZ (VIX for gold) continues to hold up, selling spreads into hard pushes on either side will be a simple trade.
Why The China Deal Is Bullish For USTs. Kinda.
Further details on the China trade deal were released on Saturday. We’ve got rare earths flowing again, soybeans are back on the menu, and America has suspended some of the more punitive actions for a year.
Yet the first line is about fentanyl precursors. Yeah, drug OD’s are bad, but why is this top of mind in the negotiations?
That gives me the opportunity to talk about one of the most batshit insane stories I read from last year.
Just learned that a large portion of the black-on-black gang violence in Philly is actually: a proxy war between Mexican cartels and a single Chinese pharma corp—funded by *the* Wuhan Institute of Virology—to control the flow and price of xylazine in Philly.
You probably had to read that sentence twice. It turns out a Chinese company found a way to bring in xylazine without the need for Cartel processing, so they just started selling drugs directly in Philadelphia. Both the Cartel and CCP were putting out kill contracts— on telegram.
The CCP has been running an Opium War operation in our country.
When you include courts, healthcare, productivity, and all the other costs… we’re running a $1.5 Trillion annual spend on the opioid crisis. That’s three times the run rate during the Global War on Terror.
The Trump administration is making big moves to get this cash back. They’re taking out drug boats in the Caribbean, looking to kneecap the Maduro regime, and now have China playing ball on the precursors.
This becomes a “drug war peace dividend,” where government spending (fed, state, and local) can come down, productivity goes up, and money velocity improves. It’s an incredibly cheap form of leverage.
Maybe that debt-deficit spiral will be pushed out long enough so AGI can hit first.
The Robotic Revolution Will Not Be Televised
I’m building out a full deep dive on robots. We will start seeing humanoid robots rolling out. Whether they see huge demand doesn’t matter, because it will provide energy to the robot narrative and cause stocks in this space to jam higher.
This should get TSLA to new highs as their Optimus is shown cleaning dishes on the Today show. The “pick and shovel” trade still works here, with semiconductor components from NVDA and rare earth plays.
In my research I’ve had two startling conclusions.
The first is how the opportunity seems to skew international. Germany is huge into existing automation technologies and that could accelerate. You’ll also have faster adoption curves in Asia due to population density and tecnocractic rule
The second is that the robotics trade already took off. While the “humanoid” play hasn’t hit just yet, other robotics certainly have.
For example, I think Symbotic (SYM) is about to rip:
They’re a supply chain robotics company with an AI kicker.
Their primary customer is Walmart, and earlier this year they acquired Walmart’s robotics business. Their product is working and they have a MASSIVE backlog.
Humanoid robots will be the “curb appeal” that gets lower information investors onboard to ETFs like HUMN or BOTZ.
But under the surface, logistics seem to have the best payoff right now, and we’ve got two convex setups ready in this space.