Animal Spirits
The market can stay animalistic longer than you can stay solvent
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What a month it’s been. The election feels incredibly far behind us but it hasn’t even been three weeks yet.
Two weeks ago we were worried about sizable sell-offs in the indices, and then this week we had a relatively quiet and comfortable grind up.
I noticed a pattern of morning sell-offs followed by late-morning buying. The indices closed near the highs most days this week.
The Russel was the standout this week, posting a 400bps+ gain, while SPX and NDX both posted ~135bps in gains each.
10Y treasury bonds rose slightly, driving yields down a little. Yields remain high at 4.41%.
The dollar strengthened, up ~700bps in the last 3 months at Friday’s close.
Bitcoin continued to be the start of the show last week, gaining almost 700bps, somehow beating out the other crypto majors assets again.
Bitcoin's dominance (a measure of Bitcoin’s market cap as a percentage of the total crypto market cap) hit a local high on Thursday.
A local top, combined with BTC stalling out in price appreciation for a while would set us up for something called “alt szn” where capital will rotate from BTC to smaller-cap cryptocurrencies.
Important Developments
There wasn’t much meaningful news last week. We got a brief scare with some Ukraine/Russia headlines, but the market largely resolved it into nothing.
Of course, much more critical than any conceivable World War III news was the news over the weekend that Trump has picked his Treasury Secretary.
Bessent has been a significant contender for the post for weeks, but his ascension came as a surprise. Recent news had seemed to imply that Trump was souring on Bessent and broadening his search.
Bessent is as blue-blooded American and Wall Street as they come. Born in South Carolina, he studied political science at Yale before working in the hedge fund industry for George Soros and Stanley Druckenmiller.
Predictably, the headlines about the choice have been resoundingly positive. Here’s a sampling of them.
It’s clear what the consensus will be: Bessent is a competent man who has run money. He’s been in the trenches, worked with the GOATs, and has the pedigree. He’s “one of us” as far as Wall Street is concerned.
Scott is expected to be an excellent counterbalance to Trump’s populist and protectionist policies. The degree to which he will succeed in that role remains to be seen, but one thing is clear: an economic adult will be in the room with Trump.
In response, the dollar finally found a solid downward move, and treasury bonds found a bounce.
Both should be positive for risk assets.
Looking Ahead
It’s the holiday season and Americans will be celebrating Thanksgiving this Thursday. Markets will be closed Thursday and have a half-day Friday.
We have a quiet week for economic data, with Wednesday’s GDP number the star of the show. It’s expected at 2.8%, but the whisper numbers have been slightly higher at 2.9% so far.
I’m stealing a great chart from
, where we can see expected vol is low this week, but should pick up in December.
Parting Thoughts
There’s a lot of complacency in the market this week, which is to be expected around the holidays. Who wants to make a dramatic call to short some volatile stock like Tesla heading into Thanksgiving week?
There’s a tendency among macro traders and analysts always to look to fade the consensus. That’s because, generally, the consensus trades' risk/reward profiles aren’t as good as the risk/reward profiles of the trades no one is watching.
I come from a contrarian background, so I sympathize with that point of view. Still, I think a lot of the “sharp” guys tend to out-think themselves.
We are heading into the holidays, which have very positive seasonality. The Conference Board leading and coincident indicator indexes are decisively fine if unexciting.
I think there’s been a vibe shift, and I think we are heading for a period of positive surprised. Just as I’m writing this, a positive surprise came across my notifications.
We have a lot of pent-up PTSD from the big bear markets of 2020 and 2022. What if things go well? What if our fears about stocks being “overvalued” and the necessity of an impending market crash are just that: fears?
A Random Punt Opportunity
I hesitate to include this because I don’t want to get in the business of shilling small-cap meme coins, but I know at least a few of my readers would want to know about it.
If meme coins are not your thing, please skip this section and promise not to think less of me. Even if they are your thing, remember that these coins are much closer to lottery tickets than investments. I’m not a financial advisor, and this is not financial advice. Also, I own some of these tokens, and I may lose faith in them and market-sell them into thin-order books in a manner that nukes your holdings.
If you’re still reading, behold:
Stonks is an utterly ridiculous meme coin, as are all of them, but it has a few things going for it that give it a good chance.
For one, I heard about it from a knowledgeable friend who says that important crypto people like it. I think there’s an element of influencers “picking the winners” in the memecoin game, so I like that.
I also checked the “followers you know” tab on Twitter, and the $STNK Twitter account is followed by Cobie and a few others who are not usually sketchy shitcoin shillers.
The overall “Stonks” meme is a solid one with a long pedigree in internet culture, and this specific coin is supposedly the oldest meme coin on Solana that is being revived. That gives it some pedigree and legitimate claim to being the “true” Stonks token.
There’s a Twitter account that holds another competing STONKS meme coin who is trying to drum up concern about $STNK. You truly can’t make this stuff up.
I checked myself, and the token's liquidity does appear to be locked, though I’m far from an expert. He claims “big information is coming” in future threads, but considering his first drop doesn’t appear to be based in reality, I’m skeptical.
Anyway, when that guy tweets, it seems to drive the price down.
As I write this, it sounds more and more ridiculous, so just remember I don’t want you to buy it, but I felt like I had to tell you about it.
Now, excuse me while I go take a shower to wash the moral ambiguity off.
Good luck out there!
Disclaimer: The information provided here is for general informational purposes only. It is not intended as financial advice. I am not a financial advisor, nor am I qualified to provide financial guidance. Please consult with a professional financial advisor before making any investment decisions. This content is shared from my personal perspective and experience only, and should not be considered professional financial investment advice. Make your own informed decisions and do not rely solely on the information presented here. The information is presented for educational reasons only. Investment positions listed in the newsletter may be exited or adjusted without notice.