Welcome to the free State of the Market report for the Art of the Bubble! Our subscriber plans make use of the same base algorithm that our crypto hedge fund, 1.2 Capital, does. It’s modified in timeframe and weighting so you don’t have to stare at your screen all day long. In 2022, for cryptos, the Dynamic Algorithm outperformed its benchmark by better than 70%. In 2022, for stocks, the Bubble Portfolio outperformed its benchmark by better than 40%. For those of you who are accredited investors, 1.2 Capital has re-opened new investor onboarding. If you are interested in learning more please reach out to us here.
The Macro Situation
Markets dithered a bit while the US debt ceiling approval eventually made its way through the House and Senate; the strong jobs report on Friday spurred a rally, with the S&P closing at its highest since August 2022.
Focus now turns to the Fed’s June meeting, where uncertainty about how sticky inflation actually is may mean that a rate increase is back on the table. Philadelphia Fed President Patrick Harker’s comments at midweek mentioned a June pause, which signaled a sharp turn from last week’s assessment and consensus amongst economists.
The Fed Watch currently reflects Harker’s view. However, Friday’s jobs report may cause yet another reverse in course.
Long-term bonds will be interesting to watch. Their midweek price reflected an interest rate pause; but since Friday’s jobs report, they’ve been trending down.
Macro-Dependent Tickers
- Long-term US Bonds: TLT, IEF, IEI
Stock Watch
There’s sentiment that tech stocks, especially AI companies, are going to experience a mean reversion. However, Wharton’s Jeremy Siegelthinks it is difficult to determine how high they might climb. Another approach is trying not to worry too much about guessing the top; and as AOTB's own bubble-trading method suggests, it might be good to get a little burned by drops.
Speaking of overvalued stocks, Tesla was above the $200 mark and then really broke out with Friday’s news, closing at $213.97. There’s a chance that its decision to discount prices on Model 3 vehicles will outlive the Friday market reverie and bring its value down.
Stock Tickers to follow:
- Microsoft (MSFT)
- Alphabet (GOOG)
- Meta (META)
- Amazon (AMZN)
- Nvidia (NVDA)
- Micron Technologies (MU)
- Advanced Micro Devices (AMD)
Crypto Watch
As the XRP-SEC drama awaits its climax, XRP holders and CEO Brad Garlinghouse have been pumping the XRP price with positive sentiment.
On another regulatory note, the U.S. is set to decide how to regulate stablecoins. If the regulation is reasonable, not only would Tether and USDC benefit, but presumably the main DeFi platforms would also, given how stablecoins are the main conduit for liquidity movement. Ethereum, Arbtitrum, Polygon and possibly Avalanche and Solana would see increased trading.
Of the main AI cryptos, FET looks in a good position relative to its competition. AOTB reports that FET recently raised $40m in capital to continue the development of a crypto wallet to facilitate transactions between coins and platforms that are otherwise cumbersome.
Crypto Narratives:
- Bank Safety: BTC
- DeFi Goliaths: ETH, ARB, MATIC, AVX, SOL
- SEC v. XRP
- “AI” Narrative: FET, RLC, GAI, RNDR
-Todd Mei, PhD and Sebastian Purcell, PhD
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This newsletter was created by The Art of the Bubble/1.2 Labs and is provided for educational and entertainment purposes only. You should expect no financial returns one way or another based on the statements contained herein.Robin Technologies and Analytics LLC is the firm that distributes The Art of The Bubble products. The firm does not provide individually tailored investment advice and does not take a subscriber’s or anyone’s personal circumstances into consideration when discussing investments; nor is Robin Technologies and Analytics LLC registered as an investment adviser or broker-dealer in any jurisdiction.
