With Third Friday behind us... all eyes turn to the Magnificent Seven
Good morning: | I hope your Sunday is off to a great start. We begin our conversation on Sunday with a reality check. The S&P 500 just hit a new record… not nominally… | But we are now trading at 3.3 times revenue for the first time… | I want to stress what that means. It means that the market's valuation now reflects about 40 months of revenue in terms of value. That's what people are paying for… | And that figure is just insane. It means that the valuation is reflective of 40 months of a top-line figure that doesn't represent profits. It represents every single dollar coming in the door at all S&P 500 companies. This means - all the money before companies pay taxes, pay workers, pay marketing fees… It's not a measure of profitability… | It's a measure of leverage and speculation. | This has never happened before—and it reflects just how much money is sloshing around and how apathetic algorithms and institutions are about valuations… | The figures are quite reflective in the valuations of the Magnificent Seven stocks, which again outperformed the bottom 493 companies on the S&P 500. As this chart from ZeroHedge shows, money and leverage continue to pour into the most expensive stocks on the index, which represent approximately 30% of the S&P 500. | | These names are completely divorced from fundamentals, and the AI trade continues to surge on the back of increasing concentration in U.S. equities. The U.S. stock markets now represent more than 70% of the Global MSCI… The Bubble… is America… | Meanwhile, the Squeeze Was ON | Last week, we saw a remarkable rally among the most heavily shorted stocks in the equity markets. The combination of rate cut expectations and Third Friday (Triple Witching) offered investors an opportunity to push all of the world's Zombie Stocks into orbit… |  | Last |
| This was a great week for traders using Ghost Prints… Brandon Chapman continues to deliver incredible opportunities in stocks like Kohl's (KSS), which have continued to rally on the back of increased liquidity and greater optimism surrounding interest rates. | All the while, retail investors just keep buying. The last time we were at this level of buying pressure, the market was coming OUT of a crisis in April… | | But now retail is buying at the all-time highs, a reflection that 1) they expect the Fed to aggressively cut interest rates… 2) they've seen the Fed's playbook in providing support to the markets if and when there is a crisis… | And - third - I think there are a lot of people expecting the Fed to reengage in Quantitative Easing in the near future… Don't shoot the messenger… | Is the VIX Now the Better Hedge? | For the last 18 months, gold has acted as a total hedge against the non-stop money printing and expansion of liquidity in the global financial system… | We see in the chart below that gold just keeps rising… But the VIX? | | Well… the VIX has experienced two sharp spikes - the first during the Japanese stock market crash in August 2024… and the second at the height of the trade crisis… | With liquidity still expanding… the VIX continues to sink… | But it's just a matter of time before we experience another liquidity crunch. We came close last week with many jitters around the money markets and falling reserves at U.S. banks… | This week, I want you to pay very close attention to what Don Kaufman says about volatility and why you need to be eagle-eyed on the UVXY, the FNGD, and other signals that indicate when leverage is leaving the financial system. | I'll be live at 8:45 ET tomorrow to help you set the tone for the week ahead… | We'll go through my top breakout, breakdown, and momentum stocks… | Plus, we'll give you access to our daily cheat sheet - The Runner - just for showing up… | Enjoy the rest of your day. | Stay positive, | Garrett Baldwin | |
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