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.
How To Read The Report
Sentiment Scores use ChatGPT as part of the AI tech stack to rate stocks or sectors.
- Scores range from 1 (worst) to 7 (best).
- These are short-term scores (ideally updated daily)
- A 3.5 is a minimum score for a long strategy.
The Macro Situation
“Inflation is actually quite low for those who don't require food, energy or housing.”
— Anonymous User Comment on Yahoo! Finance
If we were all robots, perhaps inflation wouldn’t matter as much. Utility satisfaction for robots seems like it would be less arbitrary and wide-ranging as it is for their fanciful human counterparts.
Regardless of metaphysical speculation, July’s CPI data was not imposing enough to cause a stir. Although consumer prices rose in July compared to June, it was by a mere 0.2%. Year-on-year, inflation is down – 3.2% compared to a whopping 8.5%!
Key Reasons for July’s Inflationary Bump
- Rental prices work slowly through the system (it can take up to 12 months!), and there were slight increases last month which should level out or drop in the near future. In short, current rental prices do not immediately figure into consumer price data.
- The cost of groceries rose slightly, with the cost of bread and eggs still straining household budgets.
- Although oil only comprises 3.5% of the CPI data, tightening of supply and – believe it or not – extreme hot weather in the Southern United States resulted in higher costs.
Wholesale inflation data was slightly more sobering, with producer prices rising 0.3% from June to July.
Markets weathered the CPI report; but the PPI report resulted in the Nasdaq and S&P respectively dropping 2.04% and 1.3% from their Thursday highs.
Crude oil slipped a little, falling below $84. It still remains relatively strong YTD, with a previous high of $83.26 on April 12, 2023.
GLD still has not recovered from last week’s payroll data; but its downward pressure might alleviate as the next (and final) rate increase looks a ways off.
The long game continues with mid- to long-term Treasuries as we await the economic tide to turn. To date, $55 billion of investment has moved into fixed-income ETFs.
- Todd Mei, PhD and Sebastian Purcell, PhD
AI Sentiment Report
The following sentiment scores use ChatGPT as part of the AI tech stack to sectors through 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 backtests 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
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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.
