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The Macro Situation
misdirection (noun):
- the act of getting an audience to focus on one detail while manipulating another;
- doing X to achieve Y in a way that people don’t think you’re doing Y;
- when the government leaves the interest rate untouched but sells bonds.
― New Entry in the Updated Devil’s Dictionary
When the government sells bonds, it has a tightening effect since it reduces the money supply. In essence, bond sales can act much like raising interest rates.
On Wednesday, the government sold a record $42B of 10-year notes. On Thursday, it sold $25B of 30-year notes. Because the bonds were sold at lower-than-anticipated yields, investors took it as a positive sign that interest rates will eventually be cut.
Supporting this sentiment . . .
- Friday’s revised CPI report: No change was good news. While December’s revised inflation figure dropped 0.1%, the 3-month annualized rate remained at 3.4%.
- Investors were worried there would be a repeat of last year’s revised CPI report. Everyone was taken by surprise when the 2022 3-month annualized rate was revised from 3.3% to 4.3%.
- The S&P 500 closed above 5000 for the first time in history, with Amazon (AMZN), Meta (META), Microsoft (MSFT), and Nvidia (NVDA) leading the way on 20% earnings to start the year.
Of the economists polled, 84% believe that the interest rate will remain the same in March.
Crude Oil (76.60) continues to benefit from tension in the Middle East. The most significant incident involved the Israel-Hamas ceasefire being rejected by Israel.
The downward pressure on Gold (2038.70) is not relenting as the US Dollar (104.08) strengthens on the back of pessimism about fading hopes for a March rate cut.
10-year US Treasury yields (4.177%) rose slightly as positive news about the revised CPI focused the attention of investors on stocks.
- Todd Mei, PhD
AI Sentiment Report
The following sentiment scores use ChatGPT as part of the AI tech stack to track sectors as leading indicators. (Lesson 4 of The Art of The Bubble covers the selection of lead indicators for bubble trades). The scores are most indicative for the next day of trading (a Monday), but they appear to set the general tone for the next week.
The methodology employed is based on this peer reviewed academic article, which produced 550%+ results in back tests over a 2 year time frame. We consider 4 and 5 scores to be positive, but please bear in mind that the AI model is still in its validation phase.
-The Research Team:
Dom Viera, Samantha Russell, Nicole Zinuhova, Aiza Malik
Free Stuff!
We're going to give away a handful of OG NFTs from the Kaze Collection universe -- these will grant free subscriptions to holders.
Stay tuned.
Happy Trading!!
-The Team
The 1.2 Labs Edge
Our paid plans make use of the same base algorithm that our hedge fund, 1.2 Capital Management does, but modified in timeframe so you don’t have to stare at your screen all day.
Below are two of our data service offerings for stocks. The Bubble Portfolio has never had a down year and the Leveraged Portfolio should be 3x the QQQ (so negative), but it’s outperforming by better than 12%. (Image Updated Quarterly)
This newsletter is provided for educational and entertainment purposes only and should not be relied upon for business, investment, taxation, or legal advice. You should consult your own advisors for those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by 1.2 Capital Management. (An offering to invest in a 1.2 Capital Management fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation--all of which should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by 1.2 Capital Management, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.
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