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The Macro Situation

Schrödinger’s Cat (noun):

• a physics thought experiment used to illustrate superposition, or that a thing can exist in multiple states at once—i.e. that a cat can be either alive or dead before opening the box containing it;
• a turn of phrase aptly depicting an economy that appears to be in contradictory states at the same time.

― New Entry in the Updated Devil’s Dictionary

Is the economy settling down or is it bottoming out?

We’re still in the box, though the markets may seem to think “the cat” is out of it and is alive and kicking.

The week began with skepticism as to whether the economy could avoid a recession, at least until March when the earliest rate cuts might occur. However, the Fed’s key inflation gauge showed promising signs. On Friday, the Personal Consumption Expenditure for November was less than anticipated (3.2% vs. 3.3%).

In addition, consumer prices fell 0.1% last month compared to October while consumer income increased 0.1% last month to 0.4%.

The current interest rate is 525-550. More economists than last week (75.6% vs. 62.7%) think we’ll remain steady in March:
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Gold (2064.50) was a beneficiary of the midweek uncertainty as investors hedged their bets on the resilience of the economy. The prospect of lower interest rates in 2024 and a steadily weakening US dollar (101.71) provided extra incentive.

The recent rallies in the market have not boosted Crude Oil (73.49), and some pundits believe that is because oil producers are trying to price in a recession.

Long-term US treasury yields continue their downward trend. The 10-year closed at 3.901%, while the gap between the 10- and 2-year notes remains well inverted and a little stubborn at -0.41%.

- 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!

The Holiday Season points airdrop on On Discord will take its snapshot on the January 1 at noon EST.

At that point, if you have at least a level 8, you'll be eligible for BTC, ETH, RNDR, and LINK airdrops (actually wBTC, but still).

The funds are from our Crypto Maxi+ trading bot. Next season, it'll include some moonshot funds too!

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%.

Upgrade to Paid Disclaimers

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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