The AI Super Cycle Just Gets Weirder... (Live in 15 Minutes)Let’s get all the world leaders down to Mellow Corn Headquarters.
I’ll Be Live Right Here in 15… The deck is below… Good morning… Well, here’s the part of the morning that I tell you how weird this entire AI buildout is getting. Out in California, someone filed a class action lawsuit against four hyperscaler companies… The suit? That they’re colluding to SLOW the pace of AI development. They’re saying that Anthropic, OpenAI, xAI, and Google have violated the Sherman Antitrust Act. I don’t… wait. What? So, the bubble’s bear case is reckless overbuilding (which I’ve covered). The BIS has a working paper that suggests we might have a baseline overbuild of 50%, and could be much, much higher. But this case would say that they’re acting like a cartel and restraining the output. That’s just one headline that is turning this into Page 6 of the New York Post. Google said that its Gemini model hacked into three companies during May security testing… which is exactly the way I wanted to start my day… Chinese state TV just warned its citizens that Anthropic has a privacy policy that lets the company share its data with American intelligence. I find this ironic for two reasons. First, China probably already has a file on probably every single American…and it’s very strange that Beijing seems to be running a consumer-protection division. Finally, why not? President Trump wants to rename AI… “Supreme Intelligence…” But if we’re going to do that… why not just go full Idiocracy and go with… “Beef Supreme Intelligence.”
Just the concept of AI is shows us why we need it more and more each day… On the Flows Last week, hedge funds starting buying back U.S. stocks at the fastest pace in five weeks, and I’m thinking that this has a lot to do with something that Kevin Warsh didn’t mention in his press conference. I didn’t hear a thing about the balance sheet, which is going to continue draining into next year… Morgan Stanley made a note to focus on January 2027 as we start to see a lot of changes made in the financial plumbing. We’re going to keep focusing on funding the government with Treasuries… which again is the continued game in this debt environment. Short-term funding has continued to climb in the summer months… and the thing that might be linked to the buying is that the markets are betting on peak rate expectations. Basically, we look out to April, and you’re seeing the market at over 50% on at least 4.5%.
The bets may not start to go that the Fed doesn’t there. And European stocks got their biggest bids in five months. Sure… that make sense. Narrative shifts? Short covering? Buying off that third deviation line as I keep talking about over and over again… It doesn’t make sense… It’s not supposed to do so anymore…
But as I said during my show on Friday… I was long QQQ heading into Monday. It came back to the sentiment squeeze setup (the NAAIM puke and the AAII collapse)… That remains alive underneath this market as we start the day. But the real story remains the breadth of this market. I’m worried this is a little baby bull trap, and I have seen this game before. Larry McDonald’s Bear Trap’s report…quoted Jason Goepfert… who just wrote Sunday that
Goepfert attached this chart, and it’s brutal…
That breadth showed up in our signals with Equal Weight readings crashing down to -87. We have a market held up by the Mag 7 and volatility sellers… We’re still 10 days away from the August PCE report. I’m just going to focus on the signal… and go from there. Right now we’re red… markets need something positive. It’s Trump - Xi Week…Well, we needed something to talk about all week with balloons… and it will be the summit in New York. What’s in play already for a possible agreement between the U.S. and China? There’s chatter about cutting LNG tariffs, and some new packages and concessions around energy and agriculture. This is coming as the Yuan is now at four-year highs, and just keeps running right now. The stocks to trade are going to be…... Continue reading this post for free in the Substack app
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