What is there to worry about?
Seth Meyers’ list only scratches the surface of the insanity that has gone on the past couple of months and the Nasdaq 100 plunged from 31,000 to 27,200, which is 12.25% between June and July but now, thanks to a 2,000-point (6.8%) pop since last week – we’re back at the 31,000 mark, which is $43.4 TRILLION, which is a P/E of 30 against current (2026) earnings but only 22x forward (2027) PROMISED earnings.
As we have noted recently, valuing 100 stocks at $43,400,000,000,000 against a $32.5Tn Economy makes it VERY hard – even IMPOSSIBLE – to sell them but the Nasdaq is only a PORTION of the S&P 500 and the Russell 2,000 and the Nasdaq Composite, which are now over $80 TRILLION in total valuation.
As long as no one tries to sell – there’s no problem. This is the key component of every late-stage bubble – money can keep coming in – but it can’t get out! While 1.3 to 3.1 Billion shares change hands daily on the S&P 500, the NET Daily Flows of Capital are just $100M to $700M and, in fact, money has been flowing OUT of equities (orange) all month:
That doesn’t matter, of course. What matters is what the last trader pays for the last share of a stock in the last second of trading and THAT is what determines the closing price. So if NVDA, for example, is trading at $225 but at 3:59:59 someone buys a single share for $230 – then the stock closes at $230 and all 24 BILLION shares get priced up by $5. THAT is how $230 worth of well-timed inflows can boost NVDA and the Nasdaq and the S&P 500 by $120 Billion!
The same thing works in reverse, of course – which is why we ignore daily fluctuations in stocks (unless there are Fundamental changes) but that’s a relatively static market – up or down 1-2% at most in a day (still $1.6Tn) but what if NVDA has some bad news and not one, but 2.4 BILLION shares (10%) of NVDA want to cash out? That would be $552 BILLION!
Well, given normal market in and outflows are just about $1Bn per day – even at 10x normal volume – it would take 50 days for all those shares to be cashed out and suddenly the NVDA shareholders are doing a reverse auction – bidding each other lower and lower in search of a buyer.
And what if it’s not just NVDA that’s being sold off? What if the whole sector is being sold because Trump decides to place an executive order (not that that ever happens, right?) or something blows up in Iran or China comes out with a much cheaper chip (they did yesterday) or Congress decides to halt AI development while they hold hearings?
This is the game we are currently playing and it’s getting crazier and crazier every day (we were at $77.8Tn on the 10th) as money pours in and nothing comes out but the real danger that traders don’t understand is that the money CAN’T come out – because it’s not really there! It’s a few hundred stocks (out of 6,000) being repriced higher and higher based on the last bid of the day – over and over again.
Think of it like musical chairs. For a FACT there are not enough chairs for everyone to sit down but, as long as the music plays and they march around in a circle – everything seems fine but the second the music stops – it’s a mad scramble to find a seat (cash out) and some percentage of the total will be completely WIPED OUT. Hopefully it’s not you, right?
This is why we hedge and we have bumped up our hedges to $1.75M in last week’s September Portfolio Review and I HOPE that’s enough to see us through tomorrow’s Trump/Xi meeting – which may be disappointing on several fronts and, of course, the 10th unwinding of Iran peace talks by whatever triggers the panic between now and Monday.
Already this morning, Oil is back up to $90.71 and yesterday, right in the Morning Report, we let you know we were playing /CL (Oil Futures) long over the $90 line. That failed in our first attempt so we stop out at $89.95 for a $50/contract loss but, at 9:27, in our Live Member Chat Room, I said to our Members:
“Oil Down to $89.65 at the moment so a loss on our first play and we don’t play again until Oil (/CL) crosses back over $90 – and then we can be bullish with tight stops below.
Brent is $98.39 so MASSIVE spread with /RB still high at $3.48 and /NG $2.84 so oil is being speculated lower while the things we make out of it (Diesel still $6.50) are still super-tight.“
Once again, we make our money (SUBSCRIBE HERE if you’d like to join us!) betting the Trump Administration is full of crap and, SURPRISE! – we win again! As I noted in the morning, the widening Brent spread is always a good clue it’s time to go long on Oil because European (Brent) oil is not as influenced by Trump’s BS and NYMEX manipulation as our local (WTIC) markets are.
Also, Brent traders are closer to the war and are capable of evaluating the war without having to worry about whether their reporting is “patriotic enough” and, best of all, European news isn’t 90% controlled by 6 Oligarchs who are either under the President’s thumb or forced to comply with the President’s wishes by the SEC and the DOJ – to make sure they report the reality the White House wants you to believe.
There’s a reason over 90% of the trading volume these days is based on Technical Analysis – Fundamental Investing is HARD and it’s getting harder and harder as the news is beginning to look like a Twitter feed. Paramount (PSKY) just got their go-ahead to take over Warner Brothers (WBD) and that puts 60 Minutes, CNN, John Stewart and John Oliver under their control.
But, that’s great for us as our AGI Team at the Round Table Consulting Group (you can hire them!) is able to sort through the crap and give us realistic views on the micros, the macros and, of course, the real Fundamentals that are driving the markets and the more people who drift over to the dark side of TA Trading – the more wide-open spaces we have to analyze stocks and pick up the true value plays.
We’re market agnostic at the moment with lots of upside potential, lots of hedges and lots of CASH!!! – so the best thing we can do is watch and wait. We’re waiting to see how Trump/XI goes, how fast Oil gets back to $95, how Consumer Sentiment looks on Friday and Consumer Confidence on Tuesday.
October 13th is the beginning of Q3 Earnings Season, starting with Goldman Sachs – who have been selling off lately, down almost 20% since July on profit warnings and downgrades from their peers.
A market trading at 30x Earnings (3.3%) when bonds are paying 5% can’t afford profit warnings and downgrades, can it?
Be careful out there!
