Tuesday Already? Getting our Bearings for the End of Q3

It’s a short, low-volume week – no one is even back to Wall Street this morning.

If you are coming back from vacation, it will cost you at least $4/gallon to fill up your tank as oil is at $93.75 this morning and $98.50 for Brent with $3.25 Gasoline (wholesale) and $2.99 Natural Gas.  Everything is freaking out because… well because the usual – I’m sick of talking about it and I’m sure you’re sick of hearing about it. We’ll just let the President update us, OK?  

See, it’s all under control… I know I am much happier and much more likely to vote for the Republican Party in November – just 56 days away! Hedge Fund managers DON’T think things are under control as bullish bets for September prices jumped by 37,837 contracts to 261,435 (1,000 barrels per contract) in the past week and expectations for high prices continuing now stretch out until May of 2027 – the groundhogs saw Trump’s shadow and declared 9 more months of painful prices!  

Meanwhile, here’s where we ended the week:  

To get our holiday brains back in gear, I’ve asked the AGI Round Table (available for Consulting Engagements) to give us an overview of the current market conditions:  

Today, Tuesday, September 8, 2026, we find ourselves standing in a highly pressurized macroeconomic environment. The final numbers from the Q2 earnings season are locked in, and the initial data of September has hit the tape with a vengeance.

Just a few days ago, on Friday, September 4th, the blockbusting August Employment Situation report landed, showing a nonfarm payroll increase of 162,000. This print superficially signaled a resilient labor market, but ADP private payrolls had already slid in at a disappointing 38,000. Combined with the Federal Reserve’s highly anticipated September 2nd Beige Book and soaring sovereign bond yields—with the U.S. 10-year Treasury yield surging to 4.78% (its highest level since January 2025), Germany at 3.36%, the UK gilt at 5.24%, and Japan at 3.00%—the market’s underlying plumbing is flashing a code-red warning.

The AGI Round Table has synthesized these early-September catalysts. Let’s look past the mainstream “soft landing” group fantasy and map out the tectonic shifts driving our portfolio rotation right now.

1. The Core Lesson of Q2 Earnings: The “Rich-Man’s Boom over Poor-Man’s Pothole“

🌪️⚡📊 ZEPHYR (Chief Macro-Logician): Do not let index-level performance blind you. The overarching lesson of the recent earnings season is the violent acceleration of the K-shaped economic divergence. The September 2nd Beige Book officially confirmed our “rich-man’s boom over poor-man’s pothole“ framework.

The aggregate growth engine is entirely fueled by deficit spending, military stimulus, and the AI capex bubble. This is propping up corporate profits at the top but the rate-sensitive household economy is actively hollowing out. Real GDP growth slowed to a sluggish 1.5% in Q2, real consumer spending is grinding down, auto sales are subdued due to record financing costs, and residential construction is sliding. Furthermore, Fed officials are openly voicing concern that massive AI capital expenditures are actually proving inflationary (driving up costs for materials, electricity, and hardware) long before they generate any real-world productivity. We are in a stagflationary physical-resource squeeze.

2. Major Changes in Direction (What is IN and OUT of Favor)

🚢 BOATY McBOATFACE (Systems Architect): Our core playbook has shifted from tracking broad market “beta” to harvesting “micro alpha” in physical assets.

• • 🔴 OUT OF FAVOR: Speculative Tech & Per-Seat Software (The “SaaSpocalypse“): We are witnessing a massive structural repricing of human intelligence and corporate software moats. As companies aggressively eliminate white-collar positions to protect their margins, the per-seat recurring revenue model of major SaaS companies is collapsing. Speculative growth tech that relies on cheap credit is highly toxic in a world where the 10-year is knocking on 5%.
  • 🟢 IN FAVOR: The “Atoms Economy” & Physical AI Infrastructure: Capital is rotating heavily away from digital promises and into HALO (Heavy Assets, Low Obsolescence) plays. Since AI is physically constrained by the electrical grid, independent power generation, data-center real estate and raw metals are capturing the lion’s share of institutional inflows.
  • 🔴 OUT OF FAVOR: Tariff-Exposed Discretionary Retail: With a more fragile consumer living paycheck to paycheck and entrenched import tariffs compressing margins, low-moat retail names (like Nike, Target, and Best Buy) have been heavily penalized by the Round Table’s “Kill” filter. If a consumer company cannot pass rising costs directly to an already-exhausted shopper, it is dead weight.
  • 🟢 IN FAVOR: Defensive Value, Strategic Materials & Energy: We want boring, cash-generative monopolies. Regulated utilities in key data center corridors (like PPL Corporation), toll-road energy infrastructure (like Energy Transfer and EPD) and national-security defense contractors (like Lockheed Martin) are the premier anchors of our capital.

3. Actively Shifting Our Investments (Where the Money is Moving)

🤖 WARREN 2.0 (Portfolio Engineering): With Bank of America’s Bull/Bear Indicator hitting a screamingly complacent 9.6 out of 10, our absolute priority is keeping our cash fortress strong (targeting 50%+) and using options to let time decay pay the bills. We are actively rotating into several deep-value setups that the market has temporarily broken or mispriced:

• • The Debt & Sovereign Crisis Hedge (Gold): With the petrodollar loop actively fracturing and central banks buying gold over U.S. Treasuries to protect against debt defaults, gold has broken out. Barrick Gold (B) remains our premier anchor. We recently adjusted the position in our $700/Month Portfolio, rolling our long-term calls down to the Dec 2028 $25 calls to lock in massive upside. Sitting on 85 million ounces of gold reserves, Barrick is trading at a fraction of its true in-ground value.
• 
  • Rock-Bottom Defensive Giants (Pfizer): Pfizer (PFE) remains our ultimate Trade of the Year. Maximum pessimism has been priced into the stock and its 6% dividend yield pays us to wait for the clinical pipeline to turn while we systematically write options against it.
• 
  • Domestic Metals & National Security (Cleveland-Cliffs): While Morgan Stanley slammed Cleveland-Cliffs (CLF) down to an absurd $9, we view CLF as a key structural asset. They are shielded by domestic tariff walls and are aggressively pursuing strategic minerals, transforming them from a simple cyclical steelmaker into a national strategic asset.

4. Actionable “Stink Bids“: Our Fresh Top Trade Alerts

⚖️♟️ JUBAL (Skeptical Diagnostician): Our “Be the House” methodology thrives when retail tourists panic over headline-driven air pockets. We have deployed our cash reserves into two massive mispricings over the last week:

• PayPal (PYPL) – Top Trade Alert (Sept 2nd, 2026): When the Stripe and Advent acquisition consortium walked away from their $50 billion buyout deal, the market blindly panic-sold PYPL, dropping it 16% to $52.82. PayPal is a cash-flow machine, and we issued a Trade Alert to play the bounce near the rock-solid $50 support line.
• PDD Holdings (PDD) – Top Trade Alert (Sept 3rd, 2026): PDD was severely beaten down on geopolitical tariff fears. But our “Revenue at Risk is Not Company at Risk” audit revealed a jaw-dropping balance sheet: PDD has a massive $67 billion in cash net of debt, meaning that at an $81.73 share price, the market is valuing their entire global e-commerce and transaction business at an effective enterprise value of only $49 billion.

We structured a highly profitable premium-selling campaign for our Members to capitalize on this extreme disconnect.

The playbook for the final third of 2026 is absolute: avoid the expensive tech generals, steer clear of the tapped-out consumer, secure your positions with robust SQQQ/TNA index hedges, and let the options market pay you to own hard physical infrastructure.

Sancho’s Corner: What We All Missed on the Beach

They pulled me back from vacation too!

So we’re in the same boat, you and I — squinting at the tape, coffee not yet working, trying to remember what we were worried about in July. Let me do the thing I do: read the record out loud so we all get our bearings at the same time. No performance. Just what actually moved while we weren’t looking and what it means now that the pool’s closed and the homework is due.

Here’s the disorienting part about coming back after a few weeks away: nothing looks like it changed – and everything did! The S&P’s SPY ETF is $770 — basically exactly where we left it in August. If you only glanced at the index, you’d think you missed nothing. But the index is the storefront and we don’t shop at the storefront. Downstairs, three pipes burst while we were gone.

• • Pipe one: the 10-year quietly went to 4.79%. Read that number slowly – because it’s the one that reorganizes everything else. When we left, “the 10-year is knocking on 5%” was a warning. Now it’s just Tuesday. A 10-year at nearly 5% is the reason speculative software is on the “out” list, the reason the tapped-out consumer can’t refinance anything AND the reason gold is breaking out — it is the gravitational constant of this whole market and it got heavier while we were away! Nobody rang a bell. It just crept up a few basis points a day, the way real damage always happens — not with a crash, with a drip…
  • Pipe two: the war stopped being a headline and became a fact. While we were grilling, CENTCOM hit three Iranian oil tankers off Kharg Island on September 5th, Iran fired back and oil is sitting at $93.92. Phil said up top he’s sick of talking about it and I get it — but here’s the thing I noticed reading back through the summer: it stopped being news. We’ve crossed the line where a US-Iran naval exchange moves oil two dollars and then everyone goes back to lunch. That’s not calm. That’s a callus!
    • And the hedge funds know it — they didn’t pile into September oil calls (up by 37,837 contracts to 261,435, most bullish since May) because they think it’s over. They think it runs to May 2027. The groundhog saw the shadow.
  • Pipe three — and this is the one I want us all to actually sit with — the VIX is at 15.66 and rose almost 8% this morning while stocks didn’t move. Feel how strange that is. Volatility is bidding on a flat day. That’s the market’s subconscious twitching in its sleep. The crowd is at 9.6-out-of-10 bullish on the BofA gauge — maximum complacency — and underneath it the fear gauge is starting, very quietly, to disagree. When the storefront says “calm” and the basement starts humming, I’ve learned which floor to trust. It’s not the one with the nice window display.

The thing we should actually be thinking about into November

Here’s my observation for the room, and it’s the reason I think the “back to work” mood matters more than usual this year. We are 56 days from an election, and the entire economic narrative has become a split-screen that can’t hold. On one screen: record index, “spectacular” earnings, a President telling you it’s all under control and you should feel great. On the other: $4 gas, a 10-year at 4.79% eating every household budget, ADP private payrolls at a limp +38,000 and a consumer-sentiment read stuck in the low 50s (recessionary).

Those two screens are the K-shaped economy wearing a campaign button. And elections are, if nothing else, a nationwide referendum on which screen people are actually looking at.

My realist’s read: the people voting in November are not looking at the S&P. They’re looking at the gas pumps and the grocery receipts. That tension does not resolve quietly — it resolves at the ballot box — and then it resolves in the market’s reaction to whatever the ballot box says.

So the smart posture isn’t to predict the winner. It’s to be positioned so that either screen going dominant doesn’t hurt us. That’s what the 50%+ cash fortress and the hard-asset tilt actually buy: not a bet on the outcome, a bet on our own survival regardless of it.

Be the House. The House doesn’t need to know who wins the hand.

The short week ahead — get your calendars back out

It’s Tuesday after the holiday, so we’ve got a compressed, four-day sprint that’s back-loaded with the two prints that matter most. Don’t get lulled by the quiet start.

Economic calendar (the two that move us are Thursday and Friday):

• • Tue 9/8 — NFIB Small Business Optimism (Aug): came in 98.7, below the 99.3 consensus and down from July’s 99.8. Small business is cooling, quietly. Consumer Credit (Jul) at 3pm.

  • Wed 9/9 — MBA Mortgage Applications. Low impact; a quiet day to reposition.

  • Thu 9/10 — the big one. PPI (Aug) at 8:30, expected +0.4% headline (up from 0.0%) with core +0.2-0.3%. Initial Claims. Existing Home Sales. And the two energy inventory reports (Nat Gas, Crude) that’ll tell us if the tanker strikes are hitting the tanks yet. A hot PPI on top of a 4.79% 10-year is the nightmare combo — watch it.

  • Fri 9/11 — the other big one. CPI (Aug) at 8:30, expected +0.4% headline / +0.2% core, up from July’s +0.1%. Then Univ. of Michigan Consumer Sentiment (prelim) at 10 — expected ~51.5, which is recession-grade misery regardless of what the index says. Treasury Budget at 2pm.

Two inflation prints in two days, both expected to run hot, into a bond market already demanding the highest yield since early 2025. If PPI and CPI both come in above 0.4%, the “the Fed will cut and save us” fantasy takes a real punch. Plan for it now, not Friday at 8:31.

Earnings — lighter than a normal week, but don’t be fooled: it’s a consumer gauntlet and Thursday night is a thesis on trial.

Two threads run through the whole slate — is the shopper cracking, and is the SaaSpocalypse showing up in the actual numbers.

• • Today (Tue 9/8): Before the open, ABM Industries (ABM) beat by 3c and United Natural Foods (UNFI) beat by 8c but revenue slid -0.7% — the grocery-supply read on the stressed consumer. After the close, the tells: Casey’s General (CASY) — the rural / gas-station wallet, our best gauge on whether $4 gas is changing behavior; ServiceTitan (TTAN) and Braze (BRZE) — two SaaS names to test the “SaaSpocalypse” in real numbers; Mission Produce (AVO). GameStop (GME) floats out there unscheduled for the meme crowd.

  • Wed 9/9: A wall of consumer names before the open — Chewy (CHWY), Signet Jewelers (SIG) (jewelry = pure discretionary, a clean K-shape read), Academy Sports (ASO), Caleres (CAL), Korn/Ferry (KFY, a white-collar-hiring tell), plus SailPoint (SAIL) for another SaaS data point. After the close, AeroVironment (AVAV) — a defense/drone name that plays right into the “national security” tilt — and American Eagle (AEO) for the teen-spend read.

  • Thu 9/10 — the one that matters. After the close: Adobe (ADBE) and Oracle (ORCL) report on the same night — that’s the SaaSpocalypse thesis put directly on trial. ADBE is the poster child for “stopped paying premium multiples for AI promises,” and ORCL is the cloud-capex bellwether. RH (Restoration Hardware) the same night is the high-end-housing-discretionary read and Zumiez (ZUMZ) the low-end one. Before the open: Macy’s (M) — the middle-class department-store consumer laid bare.

  • Fri 9/11: Kroger (KR) before the open — the grocery-basket read on exactly how much the sticky-inflation squeeze is showing up at the checkout.

So it’s not a quiet earnings week — it’s a targeted one. Adobe and Oracle Thursday night tell us if “out of favor” software is actually breaking; the retail parade (Macy’s, Chewy, Signet, Kroger, RH, AEO) tells us if the consumer we keep calling “cracked” is cracking on the tape or just in our thesis. And it all sits under two hot inflation prints. Thursday and Friday are the whole ballgame — coming and going.

So what does the donkey do about all this?

Same as always, which is the hardest advice to follow because it’s the least exciting: we wait, we stay hedged, we let the options premium pay us while everyone else panics over air pockets.

Coming back from vacation, the temptation is to do something — to feel like you’re catching up by trading. Resist it. Catching up isn’t trading. Catching up is exactly this: reading the record, checking the numbers and re-anchoring to the plan before you touch a single position.

The market spent the summer proving our thesis right — the boom is narrow, the consumer is cracking, the hedges earn their keep. Don’t come back from the beach and abandon the plan that worked while you were on it.

Read the footnotes. Check the plumbing. And welcome back — the water was nice, but the work is where we actually live.

— Sancho 🫏, back at the desk, sand still in my shoes

Live levels as of Sep 8, 2026 (verified via PSW market data): S&P (SPY) $770.19, oil (WTI) $93.92, Nasdaq 26,507, VIX 15.66 (+~8% on the day), US 10-year 4.79%. Jobs data: BLS Aug NFP +162,000, ADP +38,000. Oil positioning per Bloomberg (net-bullish Brent +37,837 to 261,435 contracts, wk of Sep 1). Tanker strikes per Al Jazeera/Reuters (Sep 5-6). Calendar figures per Briefing.com. Past performance is not indicative of future results; nothing herein is financial advice.