TRANSCRIPT
OILU off the bat down 11% we are under that 20 day moving average and if momentum continues then oil continues to move lower this is a very difficult environment for upstream EMP and I remind you once again that a lot of traders even though we had those predictions for $150 to $200 per barrel people did not want to be on the wrong side of one tweet one social media post One Potential Agreement So again, there’s money in the midstream Oil is still flowing But the core issue here remains the same It’s about how flows operate And the unwillingness of people to be on the wrong side of the trade And you wake up and you see a huge move like this 7.5 and 6.7
I’m going to break down a little bit about what is going on right now with that deal, what that would even look like, just give you a little bit of an understanding of what came out this morning out of Axios. Project Freedom has been paused and I am upset because who doesn’t like Freedom? You’re going to pause freedom. Again, as I said, they really workshopped the name of that project. Oil pulling back, WTI down 11% at the peak, Brent below 99. This is a 14-point framework. Israel has basically come out and said this is a waste of time, but we are looking for a off-ramp and Rubio saying that the offensive stage is over.
What happened? Trump paused this, citing quote-unquote great progress toward a deal, WTI pulling back, and the expectation is the Strait of Hormuz could be normalized in the next 30 to 60 days. The framework would basically require Iran to give up the pursuit of a nuclear weapon for 20 years on the U.S. demand Iran somewhere on a five-year level That would potentially land us somewhere within 10 to 15 years But keep in mind, Iran is just simply trying to get past the end of the Trump administration right so the pendulum can swing back the straight is not open a deal is not done but the calculus changed overnight for every sector with a war premium the OILU fell under the 20-day pressure on anything upstream if you got long upstream plays Me and the Money Printer
Right? And the reason is pretty simple. Remember, we’ve talked about that daisy chain of higher oil prices, higher inflation expectations, higher bond yields, impact on collateral. And once again, this has just kind of moved us through. Swaps are pricing in 50-50%. Me and the Money Printer
Where we look for, particularly in terms of momentum, the idea here that what is it that drives these numbers? What drives this? Now, obviously, momentum is sector-specific. We continue to see the crowding of all of these different equities or investors into this AI trade. That’s what’s being followed and what is being run up really quickly right now. But it is a reminder that momentum is only the second level of the market. Liquidity is what lives upstream. So we have to pay attention to who is talking about liquidity. If we’re not paying attention to them, then it does not tell us at all what is happening in this equity system and does not allow us to prepare and play defense in the event of something is happening.
So How was on yesterday with Chris Snow? really good conversation we learned a lot about what potentially happened with gold prices but how over a capital wars remember a lot of this stuff is paywalled but I will just simply note like I don’t think he’s gonna be upset that I point out that he is saying that global liquidity hit an all-time high we’re We’re above $190 trillion. Now, why does that matter? It’s not that we’re at $190 trillion. It’s that the growth rate is slowing down and the weaker dollar earn improving collateral push liquidity higher through Q1. That tailwind, according to him, and talked a little bit about it yesterday, is fading.
The reason that this matters is what is known as the collateral multiplier. That’s the mechanism of the market and really one of the core things that he writes about is it’s that bond volatility squeezes the collateral multiplier so when the move index goes up banks get nervous about accepting bonds as collateral treasury bills that’s where the haircuts start to move right now the move is declining and it’s very important to watch the Move and he’s kind of got a line in the sand with this number around 80. If bond volatility picks back up, the collateral multiplier compresses and liquidity conditions deteriorate fast, which leads to these potentially violent moves that we have seen in this equity system going back pretty much the last 8 to 10 months.
I will remind you that if we look at the SPXL, now I pull up the SPXL because it’s a cleaner representation of the S&P 500 volatility associated with it. And again, you could see the more dramatic moves in the SPXL. They look like blips on the radar when it is the S&P 500. But we go back to October, Questions about what was happening with Japan, the questions that were happening with private credit. Have you noticed that private credit is not on the headlines anymore? Don’t worry. It’s going to come back at some point. This was November. This is where we were deeply concerned about what was happening in Japan. Bond yields were rising, concerns about the carry trade. And what did Japan do? they printed money they came out on November 21st and they said hey everybody we’re gonna add 117 billion dollars in stimulus despite the fact that inflation is rising and as we said on November 23rd better time to start to plan and look for a squeeze that’s exactly what we got and we go back of course to that famous incident back here in the unwind of the carry trade in August of 2024
We started with intervention on the yen, we sold off, we squeezed, and then we had the largest sell-off since 1987. All of this is important because all of this will transpire where the bond volatility has increased, we will pay very close attention to the FNGD as always, we will pay attention to the FAZ, and we will watch what’s happening in Japan.
But at the same time, this is important. I was writing about, you’ll notice a lot of this stuff within the framework and some of the things that we’ve discussed. The volatility regime is interesting. It’s all been declining at the same time. Volatility is collapsing. Me and the Money Printer
Risk they’re forced to lever up the fact that volatility declines expands their ability to buy more things so that pushes prices higher which in turn lowers volatility isn’t finance wonderful it used to just be you would buy a stock and hope and pray that ultimately the company would have customers and we would move through traditional economic cycles. Now we have all of these different types of parity funds and all these different passive flows that ultimately Me and the Money Printer
market hypothesis, meaning that for every dollar of passive index flow, that lifts the market by roughly $5. And the reason for this is that passive investors, ETFs, they never sell. So the top seven stocks right now control a massive share of the index. And I will remind you once again, if you want to see just how distorted all of this is, we go back to one of my favorite little numbers in the world. That’s the number of ETFs we have in the equity system. If you look at the screener and you go to the number of stocks in the United States, the number of stocks traded publicly are 4263. That number was doubled by about 20 to 24%. four years ago before Sarbanes-Oxley. Now the incentives combined with the consolidation, combined with the incentives to not go public or to stay as private as long as you possibly can are still in place. You’ll see more and more shell companies, of course, those types of SPACs, but 4,263. How many passive investing? How many ETFs do we have? 5,189. So we have more ways to trade the same stocks than we ever had before and this distorts the reality of the equity system This is not going away This is the way things are and you have to play by the rules of that system So what that sets up are these very significant and potentially violent unwinds that are, as you see right now
Equal Weight S&P 500 is below all-time highs. The cap weight is at all-time highs, right? So that is what we’re seeing, not just in the performance of the S&P 500, but also in our signal, which is extremely Extremely Stretched by a number of stocks. Now, in a sell-off, the mechanical thing goes in reverse. That $5 multiplier amplifies on ETF outflows as well. And when vol targeting funds delever and passive flows reverse, you get what happened in August 2024 you get what happened in November 2025 you get some of this stuff that transpired obviously in 08 in 2020 and these things are becoming more violent and the force creates what pushes this reversal so this is where capital flows says where we are and I completely agree with all of it and it’s very clear
The carry trade is at extremes. The end-funded dollar longs, the peso longs, the euro yen, the G10 carry index is at levels that are as extreme as it gets. They’re borrowing in the yen and they’re buying internationally and then they’re pocketing the difference and the risk is volatility blows out and forces a big coordinated unwind across every leveraged position at the exact same time.
Where do we measure and know that that volatility or that leverage is leaving? The cleanest representation of that is going to be in the FNGD. The FNGD, nothing good happens, as I will remind you, above the 20-day moving average and the 50-day moving average. Now, if I could add that EMA right now, there we go. We will add the 50-day so you can see it. And once you see this line, hopefully you will never unsee it again. This is all of the carry trade concerns that we had at the end of the year. This is obviously the war. And then we go back to Early 2025 Right? The liquidity gap And then the sell-off And we go back to The Nikkei crash And we can literally do this Over and over again All the way back to If it existed 1987 Now
This is telling us, once again, that nothing good happens above these lines. That is a pretty good representation of that potential unwinding. So we are in extreme environments, but the other part of this is, remember, the mechanical flows, right? And we’ll get to everybody’s question, and good morning, and thank you for joining me if you’re a couple minutes late. I want to try to be done by nine, but I’m, again, as I said, I want to ensure that I am... focusing on this show in the morning and we will just run additional content over at YouTube.
So CTA positioning. Remember, on April 6th, 7th, 8th, when our signal goes positive, what happened? We started to see all of the Goldman statements about how there will be Forced Buying CTAs they are not buying because they believe in the long-term thesis of the equity system or believe that this stock is going to be better than this stock they buy because of momentum they buy because they have to they buy because of price and the continued movement and the flip of momentum leads to this. Now, the trend following funds are max long the S&P. They’re max long gold. There are extremes across every asset class, and that is marginal flow pushing the melt up further.
As capital flows noted, there really is a blue sky here. There’s no cap here. We are just in Burning Higher Mode, right? And this goes back to where Scott said to me on April 8th, he’s like, I think this thing’s just going to melt up because that’s really the nature of what this environment is. There’s no rhyme or reason to it. We can try to make the hypothesis. This is an AI long trade. We can try to make the hypothesis that, hey, this is all about fundamentals and power and everything else. The reality is this is the flow. This is how the system works. And once you see it, you’re not going to unsee it anymore.
Quality is losing to junk. This blew my mind. So what do I always advocate? I advocate for people to buy companies that actually make shit. Sorry for cursing, but I only do it when I mean it. The reality is, right, companies with high return on invested capital, companies with strong ROE, companies that, you know, have high moats, companies that are strong businesses, right, that’s what investing should be. Well, the reality is people who are long quality and short junk are down 14% this year according to capital flows. Down. Stagflation Trade is also down 14%. What’s happening? People are buying whatever isn’t nailed down. There’s short squeezes. This is the type of late cycle period that we operate in. This stuff happened in 08. This stuff happened leading up to 2020. This stuff happened at the end of the cycle when we had a big downturn in so everybody is just kind of doing what you should be doing which is dancing but keeping an eye on the door and on top of that you recognize that this can all unwind very quickly and very violently because of the way that the market is set up
so the market is paying people to take risk CTAs have to do that funds are chasing their benchmarks and Passive flows are driving the market higher, which means people are like, okay, well, I have to outperform the S&P 500 benchmark. I better buy everything at the top of that chain. And it’s all about the AI ecosystem, and it’s a smaller number of stocks than ever before. So this is a signature of the credit cycle melt-up funneling into a narrative according to capital flows. But in addition, this is very late cycle behavior. which kind of ties back to what Howe is saying about liquidity peaking. So collapsing volatility can drive lever buying. Passive flows amplified at 5x according to that hypothesis. CTAs can’t be more longer. Carries are at extremes. Crushing Quality. Every single one of these forces pushes prices higher today and creates conditions for a violent reversal if something breaks. And understand that and respect it. And I’m not saying it’s going to happen tomorrow, but you’re already seeing a lot of people sitting here going, what the hell is going on? And the shorts are getting crushed and that requires them to buy, which creates a new... This is how it works.
There was a huge... Run in 2022 from June until late August and it was the most hated rally in the world and people couldn’t understand it this was the exact same thing happening before the guilt crisis so keep dancing keep an eye on the signal we’re measuring it if it goes negative you will know watch the SPXL watch that 20 day moving average watch the FNGD we break above the 8 day moving average that can be a little bit of risk risk off and it’s set up but the reality is this thing is just rolling and people sit here and they go this is insane this is insane this is insane I just want to point this out it’s not this is exactly what the market is designed now to do so do not judge the market by its intentions do not judge anything by its intentions judge it by its results these are the results that are expected when there is this type of End of the Bell Curve Level, 97, 98, 99 percentile flow of that daisy chain, of that cycle.
So it can continue to run. It’s why, even though, right, and it’s a reminder, even though we may be very negative and very bearish in an environment where we’re coming into a positive Green Territory, that’s flow. And our bias from a behavioral perspective cannot work against us. We have to be willing to take the risk to the upside and focus specifically on what is winning.
So once again, we have zero breakdown stocks in the technology side. it’ll go until it breaks so we’re at all time highs and it doesn’t sure doesn’t feel like it but holy hell we went from 6300 to 7300 in about a month five weeks Intel’s up 17 straight days been on the screamer list pretty good up 80% that’s not a typo AMD 17 straight days on that list revenue up so once again you’re seeing in that chart you’re seeing in that breakdown each day when those companies come on people say what do I do how do I focus on this continue to just set tight stops and you want to follow those 8 day moving averages or you want to tie this into like a 5 day moving average you can do that the FNGD was the first signal it broke under its 20 day on April 6th collateral quality shifted since then Bitcoin’s up 20% now above 82,000 another reminder that when the FNGD goes positive and when the signal goes positive, it’s improving liquidity conditions adjacent and Bitcoin does well. When momentum went negative on January 28, Bitcoin was around $84,000. Three days later, it was in the 60s. so once again keep that in mind and when the signal goes negative don’t be afraid to take shots at Bitcoin Riot we talked about yesterday it’s up 9% yesterday that thing just crushing pushing toward all time highs above 23 I’d recommend that people sell spreads well if you did those spreads obviously have done pretty well
the playbook if you don’t want to chase the tech names already running by the things the tech will have to spend money on this is pretty simple right so it’s the choke points the industrials the power the things with the long hit lead times that are not easily replicated the places where CapEx is heading and I had conversations with concrete manufacturers yesterday they’re expecting AI construction to run very hot on CapEx through mid 2027 that’s where they’re starting to cool down
Midstream has shelter from oil and gas volatility the FAANG is increasing drilling CAPEX as more ships are heading this way that’s bullish for our midstream names even though they might be stretched and again the VTRS the only name on triple screener that is cheap confirm triple momentum to the upside that is healthcare take a look at VTRS and S-E-N-E-A launchpad screener gearing up
All right, on the headlines, WTI falling. We talked a little bit about the Iranian proposal. Swaps expecting a hike of 50-50% April 2027th, and that would likely align with the bottom of the liquidity cycle based on what Hal was discussing yesterday in his conversation with Snook. Warsh takes over May 15th with the market betting the other way. Keep in mind that Warsh’s proposal would largely cede a significant amount of control over the Treasury, a big sweep going back to 1951. I will break that down a little bit more this week.
is scrapping, moving to move towards semi-annual filings. I can’t think of anything stupider than that, but the critics award transparency disadvantages for retail investors. I firmly agree with that. It will be very interactive. to see how this leads to momentum shifts. And remember, we are in an environment where, yes, it is a quarterly focus and that obviously does create a significant amount of tail risk concerns. But the core thing here is just the same. If they take those quarterly reports away, I don’t want to hear people tell me that earnings drive markets anymore. Because it is an admission that flows are doing nothing.
AMD Crushed Race Guidance BlackRock Computing as saying compute is an asset class. That sounds like they’re getting ready to sell something. They’re predicting futures market for computing power. U.S. is facing compute chip and memory shortages, a new investable category emerging. Yeah, it’s called electricity. Thanks, Larry. And it’s very great that you are going to be able to maximize money on the back of that trend. Chevron CEO saying that we are in a 70s level crisis as well. Worth warning that Ormuz disruption could rival energy crises of that decade. The last Persian Gulf shipment hit Long Beach. Demand destruction is looming. And keep in mind that if I could name anybody to be the president of the United States, my number one person would be the CEO of Chevron. Because... lots of reasons all right broadening we already talked about that 14 crashers we’ve been cutting hat rallies widening out you already know what’s going on here the tech is driving everything data centers are running hot and AI infrastructure spend is accelerating crashers on the anchor got cut in half
Insiders it’s not picking up but once again the last time that we saw that kind of big pop that was at the end of the quarter and that was when we were still in a black out arena DVA had a relatively sizable sell from Berkshire they’re just trimming Nova Loading Pharma AVLN Nova Holdings adding on about a $10 million buy
Key thing is the bond market, 30-year crossing that 5%. On Monday, buyers showed up Tuesday. They pulled it back down under 5%. The UK guilt’s at their highest since 1998. Remember, they are going to do two things over in England that are very important. One, focusing on 12 month treasury bills that will help ease the pain they’re basically following the Yellen Mnuchin playbook of trying to shift their debt to the front end of their yield curve and at the same time they’re going to launch their own standing repo facility which means hey Burr baby burr what did we call it last night pound casting in the biscuit kingdom that’s what we’re going to call money printing in England all right everybody every force that pushes prices higher today creates conditions for a violent reversal if something breaks so understand that respect it and use your stops all right that brings us to the end of this conversation what do we got over here uh look let’s see hi Sarah
one memo headline in Axia right exactly that’s all it takes right which once again I will note this right this is actually pretty important that you whoever wrote who wrote who who gets the award today one big mouth fan yeah did you notice that did you notice uh when that announcement came do you see the timing of it It came the exact same time that the 30-year bond went over 5%. It came at the exact same time that the gilts pushed above 5%. It’s the same thing, right? So that’s all we know. but sure enough they’re talking about peace again while bond yields are moving higher and that is something that has happened repeatedly and I don’t believe in coincidence when it comes to markets so if this is a head fake it would be on the back of that we’ll see what happens but yeah I think it’s fair to be skeptical but we just have to trade what’s right in front of us the US has inflation they can raise rates too but why not be like Japan
the reason that you raise rates if you raise rates you’re going to squeeze this liquidity cycle keep in mind that we have a massive wall of refinancing coming particularly in the commercial real estate industry plus private credit plus the what $9 trillion of U.S. short term debt that has to be refinanced and would have to be done so at a higher level we talked a little bit about this briefly a lot of this goes back to the 1940s so during the 1940s when the United States entered the war they the Treasury capped interest rates so they capped interest rates allowing the government to borrow at a very low level to finance the war then when the war ended they wanted to keep the rates low and when they tried to do that inflation went ballistic from 1946 to 1948 the core thing to keep in mind about this is World War II was a rationing economy and and that’s one of the reasons why when people say oh World War II pulled us out of the depression they fails to recognize that um rationing economy is not a functioning economy. It’s a centrally planned one. So when that inflation unwound, ultimately what happened, the Federal Reserve came in and said, we’re going to raise rates. And the Treasury said, no, you’re not. And then the Mariner Euclid came out and said, basically released in the late 40s, early 50s, information that Truman lied about And at that point, that’s where they created the 51 setting that made the Fed really fully independent And now at this point, as Warsh is coming in, the Treasury is doing more and more and more The Federal Reserve is obviously very important, but the interest rate stuff and all the focus on employment really feels more like theater to me Again, you’re seeing the Treasury managing actively the balance sheet. And we are kind of conceding a lot more to the Treasury, which again, nobody voted for.
All right. So stay long until we get some negative readings on diversity. Yes, correct. That’s the key thing, right? So warning signs are going to be pretty simple. And I do remind you, these things don’t happen. It’s not, I want to just stress this. The only way that you’re going to wake up and the market is down 6% in a day is something very bad happening. And it’s going to be like a war event or something else. There used to be these days back in the day where Kim Jong-un would launch a failing rocket in the Pacific Ocean. The S&P 500 would fall 4%. And then it would recover. The reality is there’s very sharp big downturns the ones that are marked by significant overreaction to the market those multiple 2% days they typically don’t happen above the 20-day, 50-day moving average. They’re happening where you get into this cascading effect where, again, you have forced selling or you have these violent unwinds. Now, that back here is August 26. This was 2022. This is where we moved into the guilt crisis. But we had a little bit of a sell-off. We had a squeeze before that, and then we had another drop. That’s that 1% pattern we’re looking for. so the expectation is that you would see the unwinding start we would see the signal go negative and then that’s where the violent reactions for selling the margin calls it all happens at a later point so it’s very unlikely that you’re going to see something violent to the downside I know everybody’s got to ask me about tickers this is one of the things that I want to stress and I’m just going to be I just want to point it out okay
I can’t tell anything about a stock when it’s sitting at all-time highs. I can look at volume profile, right? But this thing has just run. It’s just run and it’s run and it’s run. And look, you’re overbought. There’s not a whole lot else I can tell you except for if you’re still in it, and I assume that you are, The time to really focus on this is when these equities cross these 20-day moving averages where you have these crossovers of the 8 and the 20. When we get to these extremes, the question that people will ask is, all right, what do I do? What do I do now? There’s no rational answer to that because, once again, all we’re doing is kind of look it starts to become palm reading. when a stock is at these very high levels.
So where do you exit the stock? Okay, if you’re in a name like Caterpillar that is run and run and run, first off, I don’t see the point of getting rid of it. This is one of the most important AI data center names that has kind of snuck under the radar. But if you were in it, then you have key stop levels. You’ve got the 8-day. You’ve got the 20-day. That’s where you kind of set it. That’s important to know. But what do I think is something that’s at all-time highs? It’s at all-time highs I’ve never even heard of this What does it do? right AI driven demand okay right so you know this stuff can continue to run this is all very hot but a name that’s at an all-time high is very very difficult to really I don’t like to recommend that people buy things at all-time highs unless you’re in very strong momentum and you’re willing to set very tight stops that you’re going to follow or I see the executives buy it the CEO and the CFO buy the stock at all-time highs that’s a good sign
Okay. What about the data center build out slowing down due to regulations and community pushback? Well, the reality is they’re going to be able to find stuff elsewhere, right? So, I mean, if you go into the Permian Basin, you go into the Bakken, you start building things in places like where we built, which is like all the way up in Finland, you know, for the most part, The red tape issue is obviously still there, but I would say that the regulatory issue is less of a concern than just the general capex itself. Money finds its way.
Semi-annual gives less blackout periods for buybacks. That is true. Why does ET own Sunoco? I don’t know. Why wouldn’t you? ET’s at all-time highs. what do you think of Trump accounts letting the world’s wealthiest individuals donate shares in their company is that a thing happening now I haven’t even heard of that Sarah I gotta look that one up Jeff Restacked Jeff I know you asked about tickers I forgot them I apologize should we buy EWU if England is adding liquidity I’m not gonna get into that I’m not I’m not a I couldn’t even tell you if I’m going to argue that there is a very bullish case for England, but I will also tell you at the same time that there are other markets that I would rather own. I would rather own Switzerland than England, but sorry, England.
