Space Video



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Space Summary

The space was dedicated to discussing the latest developments in the semiconductor market, focusing on the impact of earnings reports on market volatility. Participants engaged in detailed conversations about the software used in semiconductor production and how upcoming elections could potentially influence the industry. The space provided valuable insights into the intersection of technology, finance, and politics, offering a comprehensive view of the semiconductor market landscape.


Q: What were some thoughts shared on the US politics situation?
A: Participants discussed the challenging and volatile nature of US politics.

Q: Why was the concept of an election hedge mentioned?
A: Election hedges were considered due to uncertainties surrounding elections.

Q: How was the topic of butterflies and trading brought up?
A: Participants expressed admiration for butterflies and discussed trading as a potential hedge.

Q: What was the approach towards discussing politics in public?
A: There was a preference for avoiding public discussions on politics.


Time: 00:01:28
Market Overview, Discussion begins with an overview of recent market conditions and trends.

Key Takeaways

  • Discussion on the volatile nature of US politics.
  • Consideration of election hedges amidst uncertainties.
  • Preference for avoiding public talks on politics.
  • Interest in butterflies and trading.
  • Critique on Twitter’s downsides.

Behind the Mic

quickly touch on that. On this very line that I used to start, all the spaces where increasingly bad news is bad news. Very different than 2023, when bad news was always seen as good news, because everybody was with the view. The Fed will pivot, so why worry? But the Fed has gone too far. I’ve been saying this for a while. The Fed needs to start cutting now before it’s too late, because reversing it will become extremely difficult the longer they stay. In fact, I’ve been very vocal about this. The Fed needs to start cutting now. But my views don’t really matter. But I just want to give you one glimpse of it. Just this week we had the month of May housing starts came out down five and a half percent. Consensus was looking for an increase of 0.7%. Disaster. We had us building permits, which is a leading indicator, came out for the month of May down 3.8%. Consensus was looking for an increase of 0.7%. Bad. We had the Dallas fed manufacturing came out -15 at the same time too. And guess what happened? All of that bad data, housing related pushed the ten year bond yields lower. We were down to almost 4.2%. Because it’s bad data. Previously, even just until three months ago, four months ago, when bad data pushed the longer duration bond yields lower, you would have seen a bid under housing stocks despite having bad data. You would have seen a bid under even auto stocks, General Motors and Ford. You would have seen bid under everything that is interest rate sensitive. Not this time. You saw actually all the entire housing complex actually sold off sharply. And along with it, you saw Home Depot and Lowe’s also sold off sharply. That was yesterday. And I tweeted about this. There’s something here. If you pay attention to the price. What is ITB and XHB trying to tell me? And before that you were seeing this in April and May industrial and the transportation sector as well. Increasingly, it is becoming evident to me that bad data is resonating and stocks are reacting to it, but the indexes don’t reflect that. Today, the ISM manufacturing came out really bad. We don’t even have to go into the weeds of the numbers. The headline was terrible. The stocks did react to that, particularly related to that were the semiconductors and some of the manufacturing sectors, too. So you’re seeing increasingly an evidence of where the bad data actually resonates, particularly for sectors, and yet the indexes remain resilient and outperforming every single thing across the board. I think that the reason for that is largely because of the nature of many of the tech companies or AI companies being oligarchs of sorts, megatechnologies, not much need to raise capital, tons of free cash flow, and more than 50% contribution margin for many of these companies. I think that’s the tension that the markets have so far. I guess I have a follow up question. Maybe you just partially answered it, but my question is going to be these two things that are sort of fighting one another in these last weeks and months. We’ve had rates inching back up to four and a half range, 4.3, 4.4, the ten year I’m talking about. And yet we have these equity indexes continuing to powered away. Is it your thinking that rates going too much higher from here will then start to be a lid on AI stocks and the semiconductors climbing even further? Yes, Victor, I think you’re correct. We’re right on the same page here. When rates continue to go higher, you will start to see the multiples on stocks contract. That happened last year in 2022, each time rates were rising. In my opinion, we’re right on that ridge, right? There could be that tipping point where you’re stretching that Palm and market reaction is going to kick in. I think we’re that close. And this is one of the reasons why I’ve been consistently saying the Fed needs to start thinking about cutting rates too, so that we avoid that massive contraction whenever such time comes, that there will be the secondary negative derivative impact through credit. So we’re on the same page here. Got you on that. Thanks for elaborating on that. I see my guy Empshaad has opened his mic. Did you want to jump in, Empshaad or Jay, I should say? Yeah, I’m so captivated. You’ve got to remember, I’m in Europe most of the time. So you guys are always talking about the US market rates. Victor, you mentioned the housing market? Just a quick follow up. So I’ve heard that the US housing market has been amazing. Everyone fears it will collapse. Yet it feels like it keeps going up and up. And I’m just wondering if you have any insight on the US housing market relative to Europe, because Europe is contracting rapidly. I mean, bad news is bad news here. But I get a little bit confused when I hear the likes of you and Fayed saying bad news is good news. And I’m like what is going on here? When is this bubble going to pop? So that’s just for me. I kind of get confused with this too, because sometimes Europe is in a world of its own. Maybe you all could give me a bit of insight into the US housing markets. I love your outside perspective, especially from Europe. Because one of the reasons I started on this tangent was covering the US residential real estate in some ways. And the reason that the US housing market has been so resilient so far this year is the lack of inventories, more so than anything else. I mean, give or take a little bit of volatility, increased demand, back and forth. But it’s primarily from, in my view, a lack of inventories. I think you could chime in and let me know your thoughts on this too. I was just going to say, I love that European perspective as well, because you have a unique lens into certain nuances that I think a lot of us might not catch. I think another key component to this lack of inventory is the mortgage portion of it. People are going to be reluctant to move when they have these 2.8, 2.9% mortgages. Why are you going to move when you don’t really need to for 3.5%? And on top of that, maybe purchasing a very similar home to what you already have, a lateral move at 7.5% or 7%? So I think that’s another component why inventories are lagging so long. It’s all the interest rates, because many homeowners have locked in lower interest rates from previous years, and they’re reluctant to sell and move because current higher rates would result in higher mortgage payments. That’s a perspective that’s often missed. Yes, there’s really bad news right now on inventories. This ultimately comes back to affordability issues, too. But if we keep talking about this point that Jay is making, bad news being good news and bad news is bad news, there is something else you want to live in the real world and the practical world. Somebody comes on CNBC, like Jim Cramer, and says, well, the S&P is up a certain amount and big cuts are coming for interest rate cuts. But the reality is, why would the Fed cut rates if everything is looking great? So therefore we need to accept the reality and say the glass is half full or half empty. And increasingly, including this week, bad data is resonating into the bad stocks, if that helps. And that’s why I’m keeping an eye on this. I think there is something that is changing in this meme that bad news is good news. That is why the evidence is that when you see bad data, such as I’m talking about housing starts or building permits or the Dallas fed meters, and then you move into the industrials, you move into some of the transportation indices, and you move into some of this auction data. The point I’m trying to make bad data, bad news is finding its way back into the bad stocks as it should be in 2023. So bad news remains bad news. But in terms of bad news becoming good news and then that cycle becoming something making breaking out into bad data, the big driver is whether people believe the fed is going to reverse its stance with interest rates and start cutting rates sooner than later. Then they anticipate that A change is coming in the money supply and interest rate environment that could benefit stocks. Absolutely. Correct. Absolutely. Correct. I can’t imagine we can’t stay this high for long because this is a lag effect. Everything is a lag effect. And it’s not like it’s just this year. I mean, it’s been going on since last year. So it will kick in. It needs to be a little patient. Let some of these fiscal policies and these monetary policies play out and let’s wait for it because it’s going to come. This is one of the reasons why we want to be prepared for this. Do you think the Ukraine and Russia situation is playing a role in any of this? Europe side? Yes. I mean, don’t get me wrong. It has affected energy prices and disrupted supply chains and commodities. If you see that supply falls short on other things. Yes, it had some effect. But if I may add, though, to what was just said, I think the longer term dynamics of Europe have always been weak and we have only imported serious weakness for the region that have been going on for 15 years. We used to always say bad news is bad news and the economy is falling in Europe. I totally agree on the energy side. But one last thing on this line when we have been looking at hard data versus soft data. Hard data are your housing starts, building permits, industrial production, retail sales, real numbers, job numbers, soft data, consumer sentiment, how people feel about those. The reason I make this observation is when you look at discretionary and staples and I just go back to Kimberly why I watch these hard data numbers as opposed to soft feeling numbers. So, Bio Barn and everybody. I didn’t realize that Europe is way ahead from the multitude of announcement from big megatech in layoffs. The last couple of months, if you take a look at just Levi’s company that’s into denim pants, they’re talking about Lilly Pulitzer, Clarinet, and if you keep looking at what they keep announcing with layoffs and manufacturing, you’ll see an inkling that things are coming down in pricing power. It’s always interesting to get your thoughts on how that resonates and travels across the Atlantic. I haven’t seen any drop in pricing power here, by the way, which is and that’s consistent with the idea of sticky inflation, right, which is largely wages, wages and light items more so than commodities and housing starts. Absolutely right. To actually follow through with this point, I have been telling Cyrus that your dealership, your financing companies, they’re not moving. They’re asked if they’re also going to keep their inventory until at least the end of the year, unlike new housing start. And that’s very interesting culturally because there are very few people in the US in finance and mortgage industries, commercial real estate, multiplexes based on expectations because the European region is way ahead of dug inflation. We have sticky inflationary habits in the automotive industry, largely because people are not using public transportation here compared to the European model, where there is more usage of public transportation. And people in Europe still follow a different model or a different method to save on their money, especially in housing. That’s why we have large real estate here, which is different. I’ll say, isn’t the public transportation or maybe increased usage a larger medium term factor, because even with rising rates, people are still going to buy cars for day to day usage. And households in the US largely revolve around the second car or an SUV. So it’s still going to always remain constrained on consumer habits. Correct. Kim, I also think something we’ve missed on the US that is most fascinating is one of the biggest recent changes we’re seeing is revamping their public intrastate rail over the last 20 years. Comparing the continents is easy to forget the individual communities and states who are looking to change that such as California introducing public light rail. Sure effective or footprint if it has any impact on gas stations. Effectively within multiple states this transformation demonstrates why pricing has certain trends nationwide and will cause a change. Hi guys. You rarely hear me talk too much about energy, but right now in Europe and the biggest changes are in the energy market, material costs in steel manufacturing. These are managed between different sources, now from Norwegian symbols to Spanish sectors. It indicates overall the differences in energy transition and supply disruption from previous mainstays. Understanding this difference in Europe, it is hard for many to gauge any application of the same steps within U.S regions at all or even correct forecast for future. Sigma is primarily manufacturing producing steel because comparing it to U.S is difficult, their specialist energy efficient sector has huge public funds allocation. I agree and long term data shows hard at following policies successfully within markets too. Absolutely. However, I feel the Fed still should change policy faster. But alternatively, could also be viewed that this lag data is progressively harmful, here possible non-reactive errors by both sides should concern stakeholders. We can’t repeat mistakes, given past policy errors. Watch closely as policies are decided these months and market will face the consequences later. Yeah, I agree. I’m not as familiar with the US economy and the Fed’s interest rate plans. Smart guys like you can determine the impact better. In the EU currently, situation is more dynamic in certain sectors, impact indicators emerging this quarter shows overall growth pace experiencing frequent slowdowns amidst global turbulence. Exactly why the Fed’s interest rate policy couldn’t impact European growth directly. I think that’s where we realize steps like public intervention could ease some pressures early and having past expectations compared current makes local responses adaptable earlier. Take this insight back to analyzing future trends, ensuring market support in facing economic volatility lessons as context. Noted, great contributions all across. Coherent but essential diverse analysis of separate markets achieves its core observation thoughtfully. I breaks the fixated belief on direct relations among aligned economies without considering nuance references deeply. That’s much appreciated from this lively evening session indeed. Good we have these insights looked deeply beyond data definitions. Stretched beyond. Yeah. That’s about proper thinking, letting breadth keep our approach correct. Broad thoughts although extensive, yet very insightful on nuances. Just amplifying. Thanks for the great discussions guys. Fascinated by everyone’s thoughts. Oh hey, I just wanted to quickly mention something else. So I’ve been following certain blue chips pivoting the market rotations might get interesting. Predictive models show deviations between sectors not syncing seamlessly. Tracking emission-related expenses, technology growth, and internal portfolios – useful range data arises forecasting localized, hypothetical instances. Correcting trends accurately depicts future expectations to position right investments understanding sectoral behavior. Nice one! Great to gauge forward-looking orders, especially speculative assumptions sometimes showing unexpected market surprises. Yes and driving expected results among leveraged play integrations similar kinds afterwards. Recommend thorough models while analyzing industrial extremities likely overlooked before. Fascinating scope sure, thanks! Appreciate annotated assessments deeply. Likewise, always good. Getting into such differential dialogues leads impactful viewpoints. Enjoyable overall! Bye then, follow up soon interested on what’s ahead. Bye.

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