this drawing doesn’t relate to anything in this newsletter. just wanted to doodle something.

"När jag tvivlar skyller jag på andra" = "When I doubt, I blame others"

the market is back in "pop" territory! this is an exciting place to be.

not "pop goes the weasel" "pop," but "pop" as in pop music/culture.

"pop" as in investors are comfortable in their unknowing and/or at least think they know what comes next.

when listening to pop music, what comes next is generally always knowable. consciously observerved or not, your brain understands what's going on with the structure, the choice of chords, the rhythm, &c.

even if it's a sad pop song, it's probably predictably predictable.

markets love when predictable outcomes follow an anticipated impetus, even if the specifics remain unknown in advance.

there are still some relevant earnings to go through, but unless any are overpowering bearish whoppers, we've cleared enough significant hurdles to get us to $NVDA reporting on August 26th, at least.

everything we own / care about has already reported, so we're not following any of the following earnings too closely. but we've circled some of the ones we think The Market cares about most. anything that provides more color on hyperscaler capex, semiconductor/memory demand, consumer resilience is still relevant. but like we said earlier, markets may be more willing to write off negatives now than in the recent past.

that's the joy of psychology. even if nothing changes, things can still change. internal representations of reality shifting en masse can replace an unstable reality with a familiar-seeming, stable one. or vice versa.

to investors: inflation data was fine, jobs data was fine, rate hike odds are down, Treasury yields is fine, the earnings that mattered most were mostly fantastic, &c

the interrim silence between notable events/TACOs/disasters/reprieves no longer feels painful to sit with.

in other words, investors are generally comfortable with what they know + don't know.

contrast that with the previous few weeks (months?), where (in our view) a prolonged, irreconcilable unease that couldn't be remedied plagued markets—headwinds, one might say, but more psychological in nature than usual.

we're firmly in a long-term technological uptrend, but markets LOVE to front-run technological progress, so: it won't be smooth sailing while (as-observed-by-the-majority) "AI progress" slows, and if growth of growth of progress falters, look out below.

investors invest in the future, in the second-order derivative of earnings—growth of growth. if growth slows versus what's already priced in, even if the face-value, present-moment results remain blindingly positive, investors start to pare back their enthusiasm. and that's domino #1.

the differences this time around:

attention hopped from key event to key event, as it tends to do, but each of the anticipated-to-be-bullish events largely turned out to be ointment to temporarily soothe bug bites, not the Bawls energy-boosting rally fuel many hoped.

profit-taking opportunities!

the difference between this and different market corrections was the lack of novel stimulus, in our opinion.

it all felt as though we were stuck in an eternal waiting room, not to see a doctor, but to get handed a wad of cash…

"wow, i can't wait to get handed some dosh!"

then time passes. the clock audibly ticks its thousandth or hundred-thousandth tick.

you're told the payout is coming, but maybe you were tricked? but wait, the data supports your belief that you're at the Money Payout Office.

more time passes, and other people are getting up and leaving now!

maybe you read the sign on the front door wrong. you get up and go re-read it. as before, it says "Money Payout Office."

some random guy name Leopold gets up from his seat and goes into the back room. he comes out, sad, but says to everyone sitting around looking depressed—looking depressed in the MONEY PAYOUT OFFICE, for pete's sake....

he says: "i re-stocked the vault. it didn't need re-stocking, but i re-stocked it anyway. if you all could see the Scrooge McDuck-levels of wealth concentrated in that one place, you'd all lose your minds... anyway, it's re-stocked. i, Leopold, re-stocked the reserves of the Money Payout Office. enjoy."

everyone is smiling again. the silence remains deafening as ever, but everyone got confirmation the vault is LOADED, so their time is occupied fantasizing about things money can buy. they're no longer questioning the the Money Payout Office's credibility, let alone its existence.

1.) when nothing is happening and markets are relatively quiet, which way are relevant indices/stocks/sectors drifting? that can help provide a gauge of "Payout Office" anxiety. are investors comfortable sitting and waiting for money to come to them?

2.) tech stocks, the Nasdaq especially, need to return to highs before the next correction. the DOW, S&P 500, and Russell 2000 all put in new highs since July's market low. the Nasdaq has not.

3.) if the ongoing, gradual, two-steps-forward/one-step-back rotation out of crowded AI stocks into other themes leads to middle-of-the-road performance for the AI complex, can the market latch onto a new dominant narrative and continue trudging higher?

the worst-case scenario is AI stocks losing too many dollars and losing too much of its "elephant in the room" power for bullish reasons. one cannot simply stop being an elephant when elephants stop being in vogue. the best-case scenario would be broad market strength even alongside relative AI weakness. that's sort of what we're seeing now, with superior strength in biotech/space/software/commodities & individual AI companies. that's healthy. let the narrative slowly shift further out on the AI adjacency matrix. we've already made the jump from GPUs to (skipping a few steps) energy infrastructure. a possible next evolution of the "AI narrative" (which enables a more seamless, orderly transition in market leadership) could include loose "AI appliers," which, could be basically any company. if Ryanair can announce they're jointly leveraging Google Cloud and AWS to effectively and resiliently optimize operations, anyone can do this whole AI thing.

we've seen a lot of companies spending on AI, the benefits are only slowly materializing, and they could materialize anywhere! we're not saying it'd make sense for the AI narrative to remain the bull market's vessel forever, but it's easier than convincing the market to 1.) be more excited about something else, and 2.) not panic sell their current slate of aging AI stocks. (the issue is not the stocks, it's the valuations, which, as explained earlier, ride on expectations of exceeding future expectation.)

4.) on-site energy infrastructure stocks. as midterms approach, we anticipate more money should continue to flow into the companies enabling power generation with different regulatory and logistic hurdles, as data center hate remains problematic (for data centers).

stocks like BE, FCEL, EROC, the lattermost of which is up >30% post-earnings after the Texas-based company reported sky-high demand for its distributed energy generation systems: system sales backlog up 10x to $1.7 billion due to AI data center demand, 470 megawatt purchase order with Anthropic, notable construction starts, and $626.6 million in cash. we don't own any of these, but we're keeping tabs on them.

if we hit (temporarily) rough waters in a few weeks, after the current familiarity subsides, we'll see if any look good to us then.

we'll conclude with a chart showing performance of some thematic ETFs since July 30:

_{NASA: space}

_{ARKG: genomics-heavy biotech}

_{URA/URNM: uranium / uranium miners}

_{IGV: software}

_{SMH: chips}

_{XBI: biotech}

_{XLV: healthcare}

_{OILK: oil futures}

one interesting thing we noticed is the concentrated biotech ETF outperforming the broader biotech ETF, which outperformed a flatlining healthcare ETF. ARKG has 33 holdings compared to XBI's 157, so individual stock moves have a larger impact on overall performance. TWST, a fav of ours (and responsible for an outsized portion of our performance recently), is ARKG’s second-largest holding.

$NBIS ( ▼ 1.45% )

$RKLB ( ▼ 4.25% )

$IONQ ( ▼ 5.76% )

$SPAI ( ▼ 2.69% )

$EMBJ ( ▲ 0.57% )

$F ( ▼ 3.93% )

$LLY ( ▲ 0.03% )

$AIP ( ▼ 0.22% )

$RDW ( ▼ 4.72% )

$TEM ( ▼ 4.68% )

we had a lot of articles, research, videos, & other media to get through this week that we thought would be interesting to share, but we didn’t get around to it...

we've been focusing more on health & creativity/art.

when markets get rocky again, we'll pay more attention to them again, but for now we're comfortable with our holdings & strategy.

also, we're still trying to figure out what the heck Chunky does. (ie. what we want to write about, how we want to write about it, &c.)

a cool thing about this song is that the band, Operating Theatre, leveraged one of the first "Computer Music Instruments" that enabled the electronic music genre & "sampling." Bono read Operating Theatre's creator mention his magical computer in an interview and ultimmately ended up helping produce the song above.

Wikipedia says the first series was used by:  Peter Gabriel, Led Zeppelin, Boz Burrell, Kate Bush, Geoff Downes, Trevor Horn, Alan Parsons, Richard Wright, Thomas Dolby, Stevie Wonder, Herbie Hancock, Jan Hammer, Todd Rundgren and Joni Mitchell.

technology (computer) finds a way (to augment an artist).

see you next time.

AURUM NOSTRUM NON EST AURUM VULGI 🪱