June 28, 2024 | Read Online

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"Never bet against America."

— Warren Buffett

Friday debatable charts

This was the week the market started to think it's time to bet against AI and the world started to think it's time to bet against America.

I'm referring, of course, to Monday's sell-off in NVIDIA shares and last night's soccer result — a humiliating 2-0 loss to a country of four million souls.

(There was also a presidential debate, but the less said about that, the better.)

Americans have been riding high as of late. Our economy is the envy of the world, the AI boom is almost entirely US-based, our 401ks are accidentally overweight Microsoft and NVIDIA, we're hosting the 2026 World Cup, and until yesterday, political partisans of both sides had reason to hope they'd be celebrating in November.

Most of that is still true, but not quite as much as it was at the start of the week.

With economic data coming in a little soft, there's a growing sense the Fed may be late to cut rates; concerns are suddenly rising that the US hyperscalers (Alphabet, Amazon, Microsoft) are wildly overspending on AI infrastructure; last night we were reminded the US still stinks at soccer and will be lucky to get out of the group stage in 2026 even with home-field advantage; and the presidential race went from looking like a toss-up to looking like we don't even know who the race is between.

But the S&P finished the week near all-time highs, so our 401ks remain intact (for now).

That might be because half the voting Americans woke up feeling more optimistic about the country's post-November prospects.

If stock prices are the measuring stick, I think they're probably right — in the short term.

The prospect of lower corporate taxes, ever-bigger deficits, reshoring activity and less regulation should be rocket fuel for the stock market.

Six thousand seems like an easy target for the S&P 500 in that environment.

In the medium term however, I fear new tariffs, trade wars, bigger deficits, a smaller workforce and a politicized Fed would be kryptonite for stocks.

But that's just my politically biased opinion, and politics and investing should never mix — our political biases are definitely kryptonite for our investing returns.

So, if you're feeling worried about November, I'd encourage you to leave that angst out of your investment process — and remember Warren Buffett's advice: Never bet against America!

(Unless it's a soccer tournament.)

Let's check the charts.

The real-time opinion poll:

I didn't watch the debate last night, but I could tell how it was going from the price action in BODEN — ouch.

So you're telling me there's a chance:

The Polymarket odds of Biden winning fell as low as 19% this morning, down from about 40% pre-debate.

So you're telling me there's a chance (2):

The Polymarket odds of Biden dropping out were as high as 43% this morning.

US air traffic at an all-time high:

If last night made you want to emigrate, I wouldn't do it this coming weekend — airport lines will be a mess.

Reshoring is already happening:

There's an underappreciated boom happening in US manufacturing.

Residential construction is dying:

Pending US home sales fell to the lowest level on record in May. That might mean the Fed's rate hikes are doing their job as intended — or it might mean they are counterintuitively doing the opposite by keeping inflation high.

Get off my lawn!

The cost of housing has increased a lot since the pandemic, but on a longer-term view, it's not that bad. As a percentage of income, housing is no more expensive now than it was in the 1980s — and that's without adjusting for square footage (the median home now is a lot bigger than the median home in 1985).

Creative destruction:

Postings for software developer jobs are back down to pre-pandemic levels. That's bad for software developers, of course, but good for all of the smaller companies that have been priced out of hiring them.

Rethinking AI:

Goldman Sachs data shows that hedge funds have been aggressively reducing their exposure to the tech sector.

They might regret it:

If the AI mania (pink line) were to match the manias of the 1920s (orange line) or 1990s (blue line), we'd still have a lot of upside ahead of us.

Are all these charts debatable?

Sure, debate away.

But if making money is your goal, remember that politics and investing do not mix well — and that betting against America never ends well.

Have a great weekend, patriotic readers.

— Byron Gilliam

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Matt Hougan @Matt_Hougan

I agree but frame it differently.

We have multiple short-term, negative, and non-recurring headwinds: Mt. Gox, US gov't sales, etc.

We have multiple long-term, massive, significant tailwinds: ETF flows, the DC shift, winning in courts, improving infra, and the Lindy effect.… x.com/i/web/status/1…

tw profile: The Wolf Of All Streets The Wolf Of All Streets @scottmelker

Nothing but tailwinds for the crypto industry.

Price hasn't reacted yet because of where we are in the cycle, but being bearish right now long term is likely a horrible position.

3:21 PM • Jun 28, 2024

166 Likes 23 Retweets

11 Replies

Eric Balchunas @EricBalchunas

Yes, the odds of a Solana ETF being approved in next 12mo are tied at the hip to the odds of a change in POTUS and safe to say the chances of both are higher today then they were yesterday.. Altho we not giving any exact number on this yet. Way too early.

tw profile: Cointelegraph Cointelegraph @Cointelegraph

A #SolanaETF won't be approved this year but a new U.S. President and change in SEC leadership could make anything possible in 2025, says @EricBalchunas.

11:30 AM • Jun 28, 2024

481 Likes 75 Retweets

29 Replies

Jurrien Timmer @TimmerFidelity

With the debt dynamic worsening around the world, and central banks no longer funding that debt (at least for now), the direction of the term premium for bonds remains a question mark. With the correlation between stocks and bonds now positive, what role do bonds play in a… x.com/i/web/status/1…

1:28 PM • Jun 28, 2024

84 Likes 7 Retweets

7 Replies