Join Patrick Ceresna Live from a remote location in Puerto Rico. How To Repair a Losing Trade: Register for FREE: …
Transcript
All right, welcome everyone and thanks for joining us. I have the great pleasure of being with Cuppy Harris. Thank you so much for Hey. Glad you came over to my place. So listen everyone, we've got a great little live stream set up for all of you. We're going to take a a dive here into what's going on here with these markets. I am out here in Puerto Rico in Cuppy Castle. Cuppy, thank you for hosting me out here, buddy. This is This is just an awesome place. Hey, thanks for coming. It's long overdue. All right. So let's let's dive into this here, Cupp. So obviously the stock market has been challenged. It's been a very difficult distribution, but what's really interesting is that over the last let's say a few days even, this is really started to accelerate and I really wanted to kind of go through these charts and have a look at what's going on. Now, let's just start with the S&P, but we'll talk about the S&P afterwards, but just wanted to give context that we now have broken to lower lows. And we've we're now seeing a scenario where we're now breaking down to even towards the 6260. We can even head down to even 6,000 here in this type of a downdraft, but what's interesting is that it's happening obviously because of the escalation in the Middle East and we've we continue to see this uh uh escalate. Like we have crude oil here now back to 100 bucks on the upside. Now, what's your take on the situation? Is this a scenario where crude oil has another full leg higher? Do you think that the situation de-escalates or do you think that you know, we're heading to 120, 150 on the upside? Well, I think the situation in the Middle East is going to escalate. I mean, there's no off-ramps, right? Just thought it through logically, all the players need a a win. No one can just walk away with a like a truce and a handshake. I mean, the Iranians really really want to make it hurt. They want to make it hurt so bad that no one ever attacks them again. Trump just can't walk home. You know, there's there's no way to taco cuz Hormuz is still shut and our allies and friends need to get their oil and you know, urea and everything else out of the Middle East. The guys in the Middle East definitely don't want Iran launching missiles at them, so they want a solution. I mean, Russia's just sitting there laughing. I mean, every player in this situation needs this to escalate, so it's going to escalate. And yeah, I think trends in motion are about to accelerate in motion. So you know, the interesting part for me here is the fact that we're in a situation where obviously Trump has been trying to talk down the prices and basically suggest that this is all going to be over soon, but the oil markets aren't buying it. The thing is is that this is obviously causing economic stress as when I just pull up here the chart of gasoline futures, what you can see here is the we're now like at 320 a gallon. And this is this is obviously a huge tax on the economy and consumer confidence on that front. This is obviously spilled over into the stock markets. The question I have for you, how much do you think this is about the street versus how much the tight credit conditions and the and the breakdown in things like the private equity credit. What what would you say is the the primary driver here? Well, I mean, gasoline's all about the street. I mean, look, the crack spread were kind of bid before this even happened. I mean, the crack is I mean, look, I'm long the crack through refiners, but the but the crack spread's been bid. I mean, December 26th, December 27th, it's been upticking for 6 months now and this is just a reflection of that. I mean, everything all products are short right now and we're we're exporting [laughter] a lot of products globally now, which is which is basically just dragging the crack in the US up. But there's a lot of things being caused by these Middle Eastern things. A lot of trends in motion, but they look like good charts to me. They look like consolidating down, but you're the chart guy. I'm just doing the fundies. No, listen, the problem with charts is that you you can't really do technical Yeah, you you can't do technical analysis on on something being driven by geopolitical headlines really. So this is Don't you want to draw like a little pink box around that accumulation [laughter] there and have an arrow going up? That's how you guys do it. Well, listen, we could we could draw all sorts of stuff, but I want to draw it on some of the other charts. I want to start off here with the dollar. And what's interesting to me is is that the dollar has actually been strengthening in this whole period and one of the reasons this dollar strength has been so evident is because the Eurozone has been under huge stress. They're a net importer of energy, they're net importer of food and clearly this is impacting the European markets directly. And so the euro has essentially broken down some key technical levels and this looks like a flagging formation for a bearish continuation pattern on the downside. I'm at this point from the charts, this looks like the dollar is about to go on another rip completely driven by the the euro in the driver's seat. And but what's interesting is that we haven't seen that same deterioration in obviously the commodity driven currencies. The Canadian dollar, while it's weakened, is nowhere near you know, breaking down as badly. The Australian dollar, everything in the last little bit has been pulling back, but this is really setting up for a potential dollar breakout. Do you think that this is the kind of conditions where you're going to get a a dollar move? Are you bullish the dollar here or what's what's your position? I mean, I I have no currency positions. I I could see why the dollar would do up against the euro cuz Europe just sucks. I mean, they're going to be living in caves hunting mastodons by Christmas time, but the rest of the world, look, they're doing okay mostly. It's really interesting. So the guys short energy, you know, [clears throat] like Egypt or India, but those charts look like death. Korea, like you pull up some of these. Pull up EGP. Like it just looks like death. But um And then some of the other places, like if you pull up Brazil, sorry, that's not it. You pull up uh the BRL, so damn bid and it just doesn't care. I mean, it's it's like anything. You You just kind of want to bet on winners. Like look, that's a winning chart. >> [laughter] >> Yeah. No, you know what? These emerging market currencies have particularly the ones that have the commodities are doing very well and then the ones that are net importers are the ones that are getting killed. Like an example of of that is having a look at what's happening in India, right? Like they are Yeah, like in the end you saw a scenario where you know, they're predominant here. Where do I have it? This Here's the chart. And like we're we've basically seen the Indian economy or at least their stock market very badly hit by this whole Middle Eastern escalation. And so this is a one of these scenarios where it's a pick and choose which which of these kind of countries are the ones most impacted by the way the geopolitical situation is escalating. But overall, like the you you've were sharing with me earlier that you're still very bullish these South American countries, right? Yeah, of course. This is this is the Ibovespa and you can see that overall their stock market not only has been in a an amazing bull market, but it's actually holding up quite resiliently in spite of everything. Yeah, I mean, look, it's done well. Look, if you would have told me that what's happened this month, okay? So oils up, good for Brazil. Ags are up, good for Brazil. They just started a rate cycle the first time in 2 years, good for Brazil equities. And Lula's polling is kind of [ __ ] If you told me all four of these, I'd say the best would be up like 20% and instead it's down a couple ticks on the month and it just reminds you how you know, stocks are kind of hard sometimes. I guess you guys were positioned for this. But no, I mean, Brazil is my largest foreign country and LatAm in general. I mean, we own a bunch of Argentina too and I mean, they're they're just ripping. I love the trade. Now, Argentina has actually those been relatively flat for the since the start of the year, but overall, it'll be interesting to see whether or not it can bullishly get back above its moving averages and start trending. It's it's been kind of a a messy thing, but overall, the these emerging markets have been huge you know, winners over the last year or two and there's no reason not to believe that that they can't continue to be some good bull trend in all of these. Yeah, I mean, look, Argentina is the same. It's long ags, it's long energy. They they have some issues they need to sort out in terms of getting that energy to market and you know, same with the ags. But I mean, if you're bullish those two, I think it's going to do great. Um Yeah. I don't know. I'm bullish on Malay, so I just want to bet [laughter] on him. It's It's crazy what he's done. He's kind of gone out there and hacked away at it, and things are incrementally better, and usually get paid when things go from hopelessly [ __ ] to sort of shitty. You know, we In Argentina, we own a stock exchange, Bima. That's uh and that's that's been doing M&A in Argentina, BYMA. It's the sexiest chart you've ever seen. BYMA. Bolsa y Mercados Argentinos, yeah. Come on, that's not a bad chart. Oh, I mean, it's still in a bull trend. I mean, this is This is certainly good on the >> don't you? Yeah, you you can definitely draw the the horizontal triangle pattern that faces He's there with his crayons. It's early morning. He's just whipping them out. >> [laughter] >> The the choose some crayons here on these patterns. But, listen, like overall, I mean, the biggest challenge to almost all equities right now is driven by the short-term credit stresses, which is making tight liquidity conditions, right? And so, a lot of these stocks which have really strong bull themes are finding a hard time tracking short-term flows as everyone's waiting for seeing how this plays out. Let's Let's dive into this and talk about what's going on in these credit things, and then we'll translate it to how that it's manifesting on the different stock markets. But, I want to start off with obviously private equity credit has been a very challenging place. I'm going to use Blackstone and Owl as an example here to to just kind of get an idea of what's going on. But, like there it's been This is like a chart of death that's been happening. >> out on it. It's a giant head and shoulders. It just kind of fell out downstairs. >> What? Yeah, I'm going to put here on a weekly chart and just really uh really kind of show that chart. But, the the biggest one that's been killed is Owl. I mean, it's now back to like 2022 lows. This thing basically wiping out from peak to trough what is almost 70% drop right now that's happened in the last year. And so, this private equity credit is obviously a major stress point. They're basically freezing redemptions, making it all challenging. But, what was particularly interesting to me and what I'm looking for is what are the knock-on effects? And one of the more interesting things is that we've finally have seen corporate credit start to reflect this. And so, this here is the LQD, which is the investment grade, not the high-yield crap. And investment grade bonds have not only started to technically break down. We've seen clearly break the sideways consolidation to start a new downtrend. But, what's particularly interesting is the volatility. This is the the implied volatility in these investment grade bonds. We've basically seen the implied double on this as as the credit risk and breakdown as has everyone reaching for for the premium insurance on this. And so, you have you have a scenario now where where this is starting to break. You take a look at the way junk bonds have completely started to break down. You So, you have a scenario where what you know, one of the things Kevin always talks about is is that rarely like there's a lot of times where we have stock markets that will drop 5 or 10% and the credit markets do nothing. But, almost every time we have credit markets breaking down with the markets, that's the condition from which usually you have those 10 to 20% drops in the stock market. And so, the fact that we're seeing the the junk bond markets breaking down, you can see here this This is the implied volatilities on basically junk bonds. You can see also going from like 5% to 13% in just the last little bit. So, this is not just stock market stress, but we're seeing this really develop everywhere. Including, and this is the most interesting chart to me, which is This is the senior loans ETF. And so, you have these senior loans all having their faces ripped off. So, overall, even when we're we're going to talk some sulfur in a moment, but you're you're seeing a scenario where the credit markets are actually really stressed out about this situation, and we're now seeing that that this is starting to impact the entire intermarket relationships of how everything works. How do you size up these credit conditions? I mean, credit's a mess. I mean, these guys, as they always do, they made some terrible loans, and now they, you know, need to roll some of this paper over. Like it's like any Ponzi scheme, right? As long as more capital goes in than comes out, well, then everything's happy. And then, there's no equilibrium. And as soon as capital comes out, it just comes out way faster, and that's why everyone's gating because, you know, if you want to have price discovery on these loans, I mean, what what what's the fair market on a company that has, you know, no debt service capacity, and it trades at nine times EBITDA, but there's no cash flow, and it's like 14 pick with some adjusting [clears throat] coupon, and there's there's no confidence. I mean, it's obviously not marked at par. I mean, it's like 20 bid at 99, right? That's the market. And no one's going to pick 20 because suddenly they get a margin call because a lot of these guys have lines of credits that can lever it. So, that's why everyone's throwing the gates down. There's no one to sell it to except some of the private credit fund. I mean, I mean, look, even Apollo's gating. I mean, they're usually the guys you expect to pick up the pieces. So, >> Now, the question though for you question for you though, Kupp, is that you know, the the big debate is that can the private equity credit crisis be contained? And I think like when I think back to, for instance, 2023 when we had the regional bank crisis versus something like the subprime crisis back in 2007, one was contained, and the other one became systemic. And I think a lot of um the reasons were not necessarily that one was more severe than another, but rather about the fact that what was the market conditions overall in that environment. Back in 2007, 2008, we had oil going to 150 bucks. You had all sorts of other stress points developing that kind of built all of the stress that basically made a small problem probably far worse than than what it really was. The question for you here is is that is this something you think like the regional banks crisis like this will kind of resolve itself, or does this get worse? I think it's going to get a lot worse. I mean, a lot of these companies literally are not profitable, you know? They have some make-believe EBITDA number, but if they had to pay their employees cash as opposed to SBC, they're they're they're they're they're non-profitable on a cash basis. And you know, they have a bunch of terms of debt on them. AI is going to crush a lot of these businesses, and we're kind of entering recession as it is. I think a lot of these businesses, the equity's impaired, a lot of the debt's impaired. There's going to be tons of people laid off. I mean, where's the revenue come from? We We talked about this last night. I mean, AI is this kind of vicious cycle. Early in the process, you fire the 20% of people that are useless, and then your you know, your margins go up because you get rid of a bunch of SG&A. But, then those people don't consume, and you know, all your revenue is flat on its steps. It's kind of like a a race to the bottom. Can you cut enough expense before your revenue drops? And I mean, a lot of this stuff that the private equity guys own, they made terrible decisions. I mean, if you look at a lot of these books, it's either funny tech stuff that has no real reason to exist, but they just levered it up, or they went into the equity markets and overpaid for things at the top, and then put a ton of debt on it. And you know, if these things are still trading, they'd be trading at, you know, 30, 40% of what what they paid for it, except they put a bunch of debt on it. Or you have your typical story of some guy that went out there and consolidated all the HVAC in the state, and he paid, you know, 19 times the EBITDA for HVAC things that trade at three times usually. And >> [clears throat] >> none of these things have exits, right? And then private equity, as they always do, they just go in there and slash and burn murder the businesses. So, the business if you can't exit soon, it just gets less valuable every day. Um now, I think this is going to feed in. I I think I mean, when you think back, you know, I don't want to use like >> [clears throat] >> one example that like kind of guides everything. But, but think back to venture capital. I mean, there was a time when Uber and Lyft were basically free. It was like $8 to go home from the airport, and the taxi guy was 45. And I mean, Uber had what, like 50 billion of retained losses as venture capital funded, and then eventually they IPO'd the thing, and everyone exited. And you know, it was a good trade for them. So, everyone tried to do that model. Let's just gain market share, get bigger, get an equity offering off, get get thing listed. And so, you have a lot of these like VC sort of businesses that are not structurally profitable, and they ran out of equity funding because no one wants to put equity in at, you know, you they they basically double valuation every time they do an equity funding. So, no one else wants to put equity in. So, they're like, well, [ __ ] we can't I just think about 100 billion when it's obviously not worth that. Let's just do credit. So, they built all these credit entities to basically fund it and keep giving you, you know, free Ubers. Now, the business doesn't work, and the equity market's gotten a little smarter about this stuff. And so, if they stop funding these businesses with debt to fund basically [clears throat] free stuff for consumers to grow, then it all goes in reverse, and it just dies. And I think that's what's happening right now. They They tried to get retail to buy this stuff. I mean, remember when Trump was like, "Oh, you put your 401k in? That's great." And it turns out that retail is the smart money in the markets now. And retail looked at this like, "Nah, we're not, you know, buying some pig loans that Blackstone wrote." Like, "Nah." So, instead of putting in their 401ks, you know, everyone's dumping it. And then, you know, when you they're getting these vehicles, this isn't your Calpers of the world. This is your doctors and lawyers that are watching the news and they're like, "Get me out." You know, the Calpers of the world are still having a a meeting about when they'll have the next meeting to have a committee meeting about the next meeting. Like, "I'll put the redemption [laughter] requested in the fall." You know, then they can take their two months off for summer. [clears throat] Like, Calpers basically like Europeans. You know, they think they get like two good months for summer and there's another committee meeting about something. So, the real redemptions aren't even happening. I mean, this is just like the the the smart money doctors and lawyers who are the smart money and they're not going to fund, you know, your proverbial Uber giving free rides to, you know, Patrick and I. And so, these businesses have no value. There you go. So, let's let's pivot and go and now to the kind of government treasury bond side. Now, first of all, I want to talk about the Fed meeting and and Powell. And essentially, the market almost immediately took a a hawkish pivot on the meeting. And maybe it wasn't so explicit in the in what was actually said, but but clearly the market's interpretation of that was quite significant. And we were talking about those SOFR futures. I want to get to it in a moment. But I want to start by just talking about the probabilities here. So, the next meeting, odds are they're going to leave rates unchanged. But what's particularly one of the big moves that we've seen was going out to the end of the year, December 2026, where now the the Fed funds futures are pricing in a 22% probability of a rate hike by by the end of the year. Now, that's not I mean, still 72% chance that they leave rates unchanged, but we went from there being zero probability of a rate hike to 22% by year end. The interesting part is if you go to the end of December 2027, they're actually pricing in the greatest probability actually of one rate cut. So, you have a scenario where on the very short term, the market has gone full hawkish. Like, that that suddenly there's going to you know, be no action. They pulled all of these rate cuts out of the the SOFR futures and everything else. And and what now we find ourselves in a situation where everyone's worried about inflation. Now, I want to get talk about the SOFR in here, but what I want to ask you, do you think that the Fed is in a position to to do a rate hike? And if so, would that be extraordinary policy or like what are your what are your thoughts on which direction we're heading? Well, I think there's about zero chance they're going to do a rate hike. I mean, a good trader never says, you know, absolute zero, but I just don't see it. This feels a lot like 2008 to me where they were in a cutting cycle and then oil spiked and Bernanke was talking about maybe we have to go raise some rates here. And Fed funds actually started pricing in about 50 bips of rate hikes cuz the oil was moving. And then like two weeks later, Lehman failed and the bottom came out and they did emergency cuts. Like, in the end, this oil thing, it's sort of transitory. They were already in a rate cutting cycle. Things were kind of falling apart. I mean, SOFR the Friday before we started bombing them, like the the SOFRs were saying that we're going to do a couple a couple cuts. And like it was it was basically playing out that whole AI everyone's lose their job trade. And then oil started moving and this the SOFR started chasing it across the screen. But I just don't think this is going to drive a big inflation. I think that there's much more chance that it just kind of kills the economy like in 08. And like I think this is a great buy here. Full disclosure, I'm long the entire [ __ ] curve. I'm long these 26s, these 27s. I'm long tens. I'm even long 30s. It feels odd cuz I've never owned any fixed income ever in my life. I've always been like mentally bearish on it, but it didn't have a pay to carry. But Yeah. it actually feels like this stuff's all going to rip cuz we're about to have a depression. It's interesting because, you know, it's a it's a tug-of-war because A, obviously, higher oil prices and higher gasoline prices are going to definitely print higher PPI and CPI because it's going to have be a direct input. But the the Fed can't or doesn't have a lever from which to repair a supply shock. They can only control monetary levers in in terms of how much credit is in the system. And then you have the on the other end with this private equity credit and you can see what's happening here on high yield and and investment grade and all these other things. Clearly, credit conditions are are tight at the same time as oil is rising. And the market is seems to be far more focused on the impact of these higher oil prices and not in the fact that the credit conditions are tightening, which is is not monetary inflation risk. And and this is where I will agree with you completely that this is certainly a trade to fade. What's interesting though is that it was the big move. It was almost 100 basis points that we've seen in in the system. >> in it. >> [laughter] >> Yeah. It's it's it's insane. But what's amazing though is that no matter whether you go to the the rates markets in England, Europe, or Canada. Like this is the Canadian CORRA futures, which is basically the equivalent of SOFR out there. But also, you saw literally almost 100 basis points move. So, this was a rates move that happened, you know, out out not just in the US, but everywhere. They they obviously this is a big oil impact move. Now, you didn't see it as much on the 2027, which is the one we were talking about. I mean, it did drop, you know, more just a more than 50 basis point, but nowhere near the same as those 2026s. But overall, this this is a general shock to the system because literally at every spot of the curve, interest rates just went up. It's a it's a tightening of credit conditions because it doesn't matter what the Fed actually does. It's what the market is pricing in. And we just basically had rate hikes being priced in and credit now tightening. Yeah, look, I think we're going to do this for a couple more weeks. I mean, actually Friday felt like a hammer bottom in a way. Like we we took out the lows from if you look if you look at like 15-minute chart or something. We took out the lows the last couple days and then it just came roaring back. And I think it's the first time Yeah, that's the chart. I mean, look, it's a Friday. So, who the hell knows. But it was the first time that guys started pricing in a recession again as opposed to just the price of oil. It was the first time that it was almost tick for tick with the price of Brent. It's been chasing oil across the screen as I like to say. And I feel like it's the first time that people are starting to say, "Hey, wait a second. This this might not be so good." And when you start seeing some nasty jobs numbers in about two weeks or a month or something, I think they're going to start repricing SOFR, you know, to show it. You know, I think we're going to get a bunch of cuts. I mean, I think it's going to be like it's going to stall around this summer cuz has no direction. And then this fall, you got to start doing like emergency 50s because I really do think the economy is a mess. This is I I view this as one of the more asymmetric trades out there in a sense that they've already now taken all potential rate cuts out of the market and they've potentially even now pricing in some potential rate cuts high hikes, sorry. And the odds of them actually going through a hiking cycle is is very small. And so, at this moment, you probably have only a modest downside risk. The risk isn't zero, but but you have a modest downside risk and a huge upside if it swings the other way. It's the it's your classic prototypical lose small, win big setup. And so, this is just now a matter of figuring out when do these markets calm down and and settle in because that's right now they've been bleeding probably margin calls and other things that are causing some short-term stresses in the SOFR market. Look, I think this is a lot like in in 22 where a bunch of SOFR bros lost their shirt and they had a lot of PTSD from that. I mean, we went from, you know, worrying about can we create inflation to which transitory to J Powell chasing, you know, inflation across the screen and never catching it. And I think there's some PTSD there. I think Look, I've heard from some sources that a lot of SOFR bros had various trades on that all blew up. At the same time, you have the risk guys like, "Hey, the move index is up. You guys got to take some vol down." I think there's a lot of deleveraging, degrossing going on. I think there's a lot of warm pieces. I mean, I think also and, you know, this is kind of more speculative, but I think guys in the Middle East, I mean, they were long, you know, the back end of the curve like twos on outward. And suddenly they're like, "Hey, wait a second. We don't really need these twos. Like, we we really need the you know missile you know defense. We need this. We need this. So, let's go sell stuff. I mean, Friday was interesting because I think the sell order in gold finally ended. Whoever was dumping gold out of the Middle East to buy weapons finally is like cleaned up and it happened at the same time that a lot of fixed income went bid and I just think there's a big giant sell order out of the Middle East and those guys finally got enough US dollar to go buy the weapons they need. Look, they might reload again on Monday, but it it just felt like a cleanup print, you know, one of those boys need some missile defense. Yeah. No, absolutely. We'll we'll we'll talk about this gold chart in a second. I wanted to just touch on the fact that that this was really a move not just that in Fed funds in the short-term. Like, you can see obviously the two-year note just completely eating it on the downside. Uh but you then like the 10-year note dropped, the 30-year note basically got hammered. It was a general rise of interest rates right across the board, which is a credit tightening circumstance. And and so you know, the question is is that is in an economy that just got hit with a huge gas tax at the pump is now in a situation where accessing this credit is tight and far more expensive. And certainly this is the kind of stuff that in the end create some recessionary behavior on the other side. The bigger question though and I've heard you say this before, is this a a scenario where it would be a stock market decline that would actually be the biggest contributor to a potential recession? Uh like you know, a lot of times a recession was what would cause the stock market to drop, but is it now going to be the opposite where the tail wags the dog the [clears throat] stock market is the one that is actually going to lead this? I think so. I mean, look I think people talk about interest rates and money supply and all those things the Federal Reserve controls. But in the end, what's really driving the economy you know, supposedly K-shaped economy is the wealth effect. And if asset prices drop, people stop spending. It's as simple [clears throat] as that. We saw it in 2022 also. I think consumption is going to trail off a lot if S&P's get hit. I mean, right right now S&P's are down a little on the year. Like, who cares, right? You know, my dad's still on a cruise. But if S&P's are down 20% he's not booking another cruise. You know, he's going to start worrying about, you know, how he's going to be a retired guy. And I think that goes through the whole system and it goes really fast cuz everyone watches S&P's and look, we've had the petrodollar for 60 years basically propping up all our asset markets. They just keep recycling capital. And maybe we have the you know, yuan dollar you know, petro yuan or maybe they just put the petrodollar in reverse for a year as they buy weapons. But whatever's happening, I mean, I think the US has this undertone in the market. Retail's basically been eating whatever else is selling. Retail doesn't have the infinite capital to buy this. And as the war escalates, which is my view, I think guys in the Middle East are going to need to go hit their sovereign wealth funds and you know, cash in more chips and buy more weapons or you know, buy wheat or buy you know, other things that their citizens need. And you know, I think it's going to I think the S&P rolls over pretty hard and I think it hits consumption and that just leads to the recession we're all talking about. That's a nasty chart, right? I mean, maybe it bounces or maybe it just maybe it just wipes out. I don't really know. You know, the interesting part Cuppy from a technical perspective, what we have seen in commonly in the past is that as we approach major highs and this was like the pre-liberation day drop, the the market basically stayed heavy along its highs for many months, four or five months before ultimately breaking. And it seems like this was a complete deja vu where back in October, November we hit these highs and we basically went three, four months with the stock market being able to make no progress whatsoever on the upside and just roll over. Now, this is an interesting dynamic. I'm going to quickly go through a couple of charts here just to put everything in context. First of all, uh this drop has caused the spike in volatility. So, we we we got in that first drop that happened back at the start of March. Uh we had that spike up to about a 35 VIX. Well, we're back into the 30s here again. So, things are starting to once again accelerate on the upside of volatility in there. Even though realized volatility has been lower, we've talked we we were we were talking about that earlier. But we're in a situation where the stock market is not had any capitulation puke point. And usually what happens is that when stock markets start a sell-off like this, rarely do they just randomly stop with a 100 point down day. Usually there there's like a flush out big margin call that comes in and creates that liquidity event on the downside. Do you think that the risks are growing that we're going to have one of these big down days where we're going to be down like three, four, 500 points? It seems like every one of these drops has been this methodical 100 point down day and it's and the the buy on dip traders come in there to try to fade it. Like, how do you size up the the pace from which it's been declining and how this plays out? I mean, the last couple days have felt so orderly. It feels like someone in the Gulf has a VWAP order and they're just working it at 2% of volume on Spoo. It doesn't feel wooshy. It doesn't feel panicky. It feels like Americans keep buying the dip. I mean, as we know, like you get margin calls on last synthetic products that are sitting 10% below the market, they start blowing up. But in reality, I think you really have this petrodollar going in reverse and these guys are not price sensitive sellers. It's not like you're looking at this and saying, "Nah, it's getting a little cheap. Let me hold off on my sell tickets." These guys need to buy weapons. I mean, they're they're spoos. And you know, the Middle East is never, you know, super stable. Like, if they run out of wheat and corn and you know, all the stuff that their citizens want, like they're not exporting any, you know, oil right now. They they need, you know, to buy stuff. They don't have that revenue coming in. And the only thing they could do is sell this. I mean, the rest of their money's locked up in soft bank, you know, like they they they there's no way to get the money out, right? So, you have to you know, you have to sell what you can however you want to. And what they can is S&P's. And so there's a lot of trouble. Pull up Nvidia cuz it's it's the big dog and that one finally broke down. I mean, that's been basically 70 bid at 170 bid at 190 for six months. And I mean, you'd call that a head and shoulders maybe. I don't know. I'm not a chart guy. Yeah, you can you can jam a head and shoulders on it. And so now, you know, you got some resistance I guess at 170. Look, look I'm learning, Kev. Patrick, I'm learning. Look, I I I think this could break hard now. I think everyone has their stop loss in there at 170 and Look, I I think this could lose a lot. I mean, I think it's going to go ex-growth sometime in the next year or two and or at least the growth rate BO D cells to like 10%. I mean, you can't outgrow your customers and their customers are on fumes now being able to fund all this. There's no more buybacks. You know, there's no more you know, they they kept the dividend, but you know, a lot of their core customers now are going to the debt markets to fund data centers and at some point you just have to pull back. And you know, if you look at the analyst estimates to 2030, this there's no way Nvidia's going to hit those growth numbers because, you know, Microsoft and Meta aren't growing at the same rate. Like, it's just physics, right? And so I I I think this is going to pull back to a much more sane multiple. I mean, people always forget that semiconductors are cyclical. I mean, we've had a couple year run where they haven't seemed cyclical, but I remember 15 years in a row of Micron losing money and doing capital raises. Look, like you can't ignore gravity here. And look, Micron's a terrible chart, too. And so look, it's way too much capital in a super cyclical business that historically has destroyed capital. And I think these things will go back to trading at, you know, point three buck cuz that's what they're worth. Right. Right. Well, you know, the the interesting part and why this is the moment where things could accelerate is well, first of all, let's break it down this way. The Mag 7s have been distributed basically for the last six months. After, you know, their bull peak back in October, there's been that huge sector rotation getting underway and the selling of the Mag 7s was a theme that has just over and over again been there. But we've now seen the Mag 7s literally accelerate to the downside here. Nvidia is a key part of that. But but now the the bear market, the vicious part was in the software space. This this is that IGV and this has been this is the chart of death here. Like this is this has been an awful breakdown. Everyone got excited that there could be a low back in February, but look how quickly the software broke back down. So, you have the Mag 7s and the software being murdered, but what was holding everything together was the SMH. So, we had basically semiconductors that were taking all the flows. Everyone selling software, buying semis was was the rotation. What was amazing is that the semiconductor ETF, which 20% of its waiting is in Nvidia. Had a 36% run into the first few months of the year. You know, great bull right and Nvidia didn't participate at all. Right? And so you had a lot of the Asian ones working which was you had the Cosby ripping in one of the most extraordinary runs on the upside. But and this is the thing here the semiconductors held everything together. And yet now it's pretty clear we have some sort of a Cosby top. And you have semiconductors breaking down and Nvidia breaking that key support line. So now you have a scenario where it's no longer sector rotation without a software into into semis, but now you're seeing that actually everything is beginning to sell. And like to me the interesting part here is if we see the Cosby break below this 50-day moving average and start to really break down. If we see Nvidia not make a rebound and and stay below that 170 level, we now will have a situation where there's literally nowhere to hide. It's going to become a correlation one everything going down together kind of scenario and that's where things could really accelerate. What when you hear me say this do you what's your take on all of this and how would you size it up? Well, I think there's always somewhere to hide. But yes, I think the really over-owned sectors the popular retail places where all the hedge fund bros have been hiding out long. These charts look awful. I mean it looks like death. And then they've been you know shorting my names to basically buy more Nvidia. And so my name's doing well. Pull up Valero VLO. I mean pull up a five-year chart of that and tell me that's not sexy. Like zoom back a little. I mean Yeah. It's doing the [ __ ] coin trade. So maybe needs to pull back to 200 where it broke out. But I mean look at it to a bigger chart like consolidate years and then it's just going. And yeah look it's like a big consolidation it's just going. It's going for it. Like this chart that look great. I mean like look at Marathon MPC. This trades at like If you if you got some cojones, you could short the midstream out MPLX which they own two-thirds of and you're buying core Marathon at less than one times cash flow. Like that sounds cheap to me. And you know they're going to use it all on buybacks and give you a little bit of dividends. You know, look you want to know how hot this market is in the refiners? Valero set one of their biggest refiners on fire and the stock was up 10 bucks in the day. Like that tells you how hot the market is. Well, listen that's that's there's no denying that these energy plays have been you know running hot. The interesting thing cup that I was thinking is like obviously whether oil's up 20 bucks or down 20 bucks is going to be about whether there's escalation or de-escalation in the war. But you know, the the bigger puzzle to solve is did something fundamentally change in the energy space where there's like a regime shift because there were the bear market of energy for the last decade was all on the fact that there's no cap ex spending. Everyone's you know, oil is dead all of this kind of stuff. Now suddenly this is where all the money is flowing. This is the only place performing. And the question is is is even though there'll be some short-term volatility like if oil drops back to 80 bucks, of course there's going to be a small pause in in the advance of these stocks on the short-term. But do you think that there's a much bigger picture bull market getting underway in here that can last a prolonged period in this kind of like a regime change type of scenario? So I think oil and oil producers they're capped by the fact that this war will eventually end. No one knows when and how. So they're going to earn a lot of retained earnings before that happens. But in the end the the world just has too much oil. That's that's kind of my view. I was wrong I think on the cap ex side thinking that they were starved cap ex. I mean I think the technology has made it easier to produce oil faster and you don't need as much cap ex. Like I'm not super bullish Brent. So I think Brent might go to 200 or 300 or 500 who who the hell knows in the short-term. But eventually [clears throat] Brent's going back to 60. Like I think the the trade with Valero is that's where the bottleneck is. You can always produce more oil. You can't produce more refiners takes five to seven years. And so that's where I'd be playing my you know, intentions and I'm always scared the war is going to end tomorrow oil rolls over and dies. So that's not really where I want to be. I want to look at the crack spread which is moving out of control. You look at the D26 or D27 you pull it up. I mean D26 is at 31 right now. That's a damn good crack. Like you're talking that Prompt is over 50. Like Yeah. And so This is this is this is the Brent crack spread here. This is the standard. So the arb Bobby at Brent Brent crack though. And but it's it's at 25. Like this is still a highly elevated level. So these refiners have huge margins, right? Like it's Yeah, they're printing money. They're literally printing money on that. That's that's definitely the case. The big the bigger question though is let's go back to the S&P here though. So obviously energy is a huge benefactor. You know, it's funny how that echoes what was happening in 2008, right? Which is oil was going to 150. The energy stocks were up 70% at one point during that period while at the same time financial banks were down 50%. As the subprime was eating everything. So you had this huge divergence. But inevitably you know, when when the economy cracked even the energy stocks started to inevitably correct. The bigger question here is is like where and how far does the S&P go in on the downside now that we've corrected. So this is a weekly chart. Like are we going back to 2025 lows near 5000? Like where where do you think the S&P can go if this really gets out of hand? Well, I mean I think this war escalates. I don't think there's any off ramp. I think stocks get murdered. I mean why doesn't it go to 4000? I mean it's all right there's no rhyme or reason to this. I think you know so much of the equity market is tech and software and we know those are hurting and the S&P doesn't have a lot of energy in it to offset that. Look there's a lot of there's a lot of really good looking charts out there. Let's talk about some of the good stuff. Pull up Marax MRX. We're long this. We're also long Valero for disclosure. And pull out a little on the chart. Pull out do like like like go out all the way to the IPO like three years back whatever. Yeah. I mean look this is a good looking chart. I mean the stock jumped this week because they had their analyst day and they raised guidance and they they raised numbers. Look this is basically long vex. When things are volatile these guys print money. They're a commodities merchant. They're doing hedging. They're they're they're basically CPL. They they do all these things for commodities trading. When when volumes go up they make money. When spreads go up they make Um everything is all actually good. Back to K. You actually you know, accrete over time because they retain the earnings and pay a little dividend. They retain the earnings and buy some other players. This is basically what Vex and I think in a multipolar world you want to be structurally long volatility. I mean this is long volatility to me. It's a pretty good looking chart. You know, let's talk about SI for a minute. SI I It's had a little bit of a pullback with gold. But you got it there. SI I SI It's had a little bit of a pullback with gold. But like I think it's a good looking chart. It consolidated all summer and then gives it another run. I mean this is just a multi-asset manager. They're they're broad terms 1/3 gold, 1/3 silver, 1/3 uranium. All things I'm sort of bullish on. You know, they get some battery metals and you know, copper and all sorts of other [ __ ] tossed in there. Plus they they earn some incentive fees cuz they they run some portfolios that are incentive fee. And if you're in a bull market you get some incentive fees. I mean this is a stock that just keeps going. And look it probably got a little overdone when it got to 160. It's probably going to consolidate here. But this is not a bad looking chart. It's pulled right back to the moving average and I think you know, if gold bottomed this bottomed. I mean this is just a proxy for gold. This is basically high beta to gold effectively. You know, it's a large position for me. But look at as the price of gold goes up their AUM goes up because you know, they they have the funds you know, just appreciate in value and they get inflows. And you you get that double whammy. It's just I think this will eventually trade at a large premium to the royalty companies which traded a premium to the mining companies. And this still trades at a discount. So we own a lot of it. But I'm just saying there's a lot of charts out there that look good. I mean yeah, there's been some pullbacks. That's what happens. But where the capital is going to come out of the market and you know, in the in the tech names that are overvalued. I think they're going to come into these sort of names. I mean look this is like a low 20s sort of earnings multiple. It's it's not even expensive. I mean, the stock is up like what, three, four X in you know, 18 months, but it's not terribly expensive cuz the earnings grew faster. Yeah. Now, listen, listen, there's always going to be stocks that that are opportunities. So, thanks for for bringing these up. And you know, I think that uh >> Yeah, no, listen, >> hard. But you know what, but the that's that's a an important spin though to put on here, which is look, we're in the midst of a broader sell-off and that creates tight conditions that cause short-term risks. But but looking at it from a glass half full perspective, the biggest problem in in the market like three or four months ago was that everything was expensive and you're not able to get a lot of asymmetry in buying a lot of these markets that have already been at elevated levels. But when you have these kind of stock market washouts, even though there's short-term risks, this actually resets the system to allow the next major bull markets to happen where the really big money is made. So, you know, it's one of these scenarios where you know, you have to just be able to ride out the short the shitstorm on the short-term and and and then what on the other side of it is where the real money is made. Right? Like when all of these stocks are selling discounts. And so, there's going to be some really interesting bargains out there on on a lot of these different stocks that let's say get dragged down just because the selling widens and margin call forces people to sell [ __ ] that they shouldn't. You know, and and that's where you have to be ready to scoop things up. Absolutely, bro. So, let's talk grains here for a moment cuz we were we were mentioning this when we were talking and this is the weekly chart on corn. But what whether it's corn or wheat or the beans, we've seen this vicious three-year bear market that happened in in this space and and they're just starting to wake up. Obviously, there's a lot of the stress that's coming from the Middle East and the supply issues potentially of fertilizers and other types of things, but we're seeing these grains starting to to slowly wake up. This is like the first time for instance wheat has sustained a period above that 50-week moving average since really been in the bear market since the Ukraine war started. And so, the question here uh how much do you think food prices like these kind of grains can move if this if the situation if there's no off-ramp and things continue to be stressed, where can these things go? Do you have any ideas? Higher. Look, if I didn't know what If I didn't know what product this was, I'd be long just cuz the chart's so great. Yeah. But it's wheat and every time I ever trade ags, I lose money, so it's probably not going to work. But I'm I'm long some wheat and long some corn. I have the worst track record with ags ever. I'm just the worst at this. But the chart looks right and look, wars historically make ags prices go up. At least there's tons of disruption and you know, especially corn, which is really just a substitute for petroleum. Um it almost tracks petroleum and the input costs are all up a ton and now the output, which is corn, has to catch up to the input or else the farmers aren't going to do it. And it's happening at a unique time cuz it's planting season right now and farmers are in the final weeks of making decisions on what they're going to plant and how much they're going to plant of it. And fertilizer prices have gone crazy, their diesel for their tractors have gone crazy, but you know, the corn and wheat haven't gone up yet. And so, I think guys going to plant less. I mean, farmers ain't stupid and I don't know. I'm bullish, but like I said, I've never made money at these and so, I'm not going to make money. I would say that you could buy upside call vol upside calls like out of the money calls for nothing, like pennies. And it might be a better way to trade this cuz when wheat and corn move, they don't just go 50 cents. I mean, they go dollars. And so, you could buy like real tailly stuff, like you know, 30, 50% out of the money for nothing. It'll cost you a couple ticks. Absolutely. Like this is that's where a lot of the asymmetry comes in because you know, at these lower levels with volatility contained, you have a scenario where you know, the that right tail is being you know, priced very, very cheap and then and these things can always move far more than everyone expects in many cases. Let's let's slowly wrap up. We got to I want to just circle back to gold and silver. Um here cuz you mentioned it earlier, but I wanted to just touch on this chart. And like so, gold completely ate it in the last uh month. Uh it's one of the bigger drops that we have seen. Obviously, there was this parabolic melt up on the upside and and it's been a very challenging two months in being a gold investor. Uh the bigger question, do you think that this washout was already enough or do you think that this has started that this will still be under pressure from Middle Eastern selling or whatever is driving the short-term flows? Are you already a buyer here or you think that there's still risk here? I mean, I'm not a buyer here. I mean, I think it's a there could be more downside, there could be a lot more upside. I mean, I think long-term goes a lot higher, right? But look, that's a failed chart. It probably is going to make a you know, dead cat bounce and at least test the lows there at 4,100. And we'll see how it does at 4,100. But I don't know. Gold usually is a low realized volatility asset that trends and chops and backfills. And it just went from 2,000 to 5,500. That's a crazy move historically for gold. And you have to go back to the late '70s for such move like that. I think it's going to backfill and chop and I mean, there's a reason when you when you look at the Chinese who are huge buyers of precious metals, there's a reason they stopped buying gold. They started buying platinum and silver and copper. I mean, they all fill the same role as being stored energy and and debasement trades and >> [snorts] >> you even have stuff like zinc that's starting going up just because the Chinese said, I have $20 and let's go buy something. Let's go buy the laggards. You know, we missed the moving gold. Let's go buy the other things we can store where you can store value. And these weird things like zinc started going up. And you you kind of have this head-scratcher moment cuz a bunch of things that you can't store like you know, soybeans or pork bellies, like they didn't really get a bid. And the commodities you can store like zinc, like no one's really eating extra zinc right now. Like they they went bid and I just think as long as gold is expensive and some of these other things are cheaper, I think the incremental buyer and this is you know, sovereigns mostly buying this. I think it's going to be in other places where you see the bid. Look, I'm not I'm not bearish at all, but I have no position. I own my Sprott, that's my that's my trade. You know, I I capture all of these. That's why I like it so much. But no, I have no idea on this gold. If I had to guess, I'd probably think it just chops wood. Yeah. Well, you know what, listen, we're by the way for our listeners that aren't aware, we're live streaming out here in Puerto Rico. I'm Kuppy is giving me a great tour of the island over here. It's it's it's a great time. But but on Monday, we're going to see these markets and it's going to be probably quite a trading day in there. One of the the big things is there's that big JP Morgan whale put with all of that short gamma for dealers that is sitting just below or I should just above the market here. It's like near this like 6475 level. So, Monday is going to be quite the trading day. We're going to see what kind of volatility comes around whether there especially if there's some headline that comes in from the Middle East or something that could even spur this further. But certainly, this is a big downside move. Now, Kuppy, I'm just going to quickly give one quick plug here for for a webinar I'm doing. Like three weeks ago, I did a webinar on how to hedge a portfolio and we invited all our Market Huddle members to come on to a live webinar and those of you that benefit from that's awesome. I'm going to be doing actually a second webinar not on hedging, but rather on repair strategies and where I'm going to be just covering all sorts of strategies on how to fix positions that you're stuck on, how to change your break evens and how to fix trades without dollar cost averaging. And so, that's on April 7th at 4:00 p.m. You can there's going to be a link right now in this chat that's that's posted. Those on the live stream can just click on the link or otherwise just go to bigpicturetrading.com and you can register and join me for that webinar. So, please take a moment to register for that. And otherwise, Kuppy, you know, I always want to make sure that you have a chance to do a quick plug. Those listeners that want to follow you aren't, where can they find you? Where they can learn more about you? So, go to my website at pre cap p r a c a p.com. I host my blog there. It also has information about my fund. Unfortunately, I haven't been posting much on my blog, but I need to get back to it. And then, you know, I've been involved with KEDM for many years and all of you should go there and take a free trial. You know, right now the macro is leading everything, but it goes in cycles and we'll eventually be back to a cycle where you know, there's going to be tons of opportunity in the event driven side. Usually all the event driven bros become macro bros near the bottom and there's huge blowouts and all sorts of things you can do and you know, that's that's usually on the way back up and where you make the money is the event driven stuff. So, um I'd say go take a free trial there and uh Absolutely. What we'll what we'll do is uh we'll we'll include those links uh in um in the description there so that people know where to find you there. But listen Kupp, uh thank you so much uh for for joining us for this uh for this live stream. It was a great conversation and it's going to be super interesting to see uh how the this upcoming week plays out because it just feels like things are starting to crack here and so the volatility is going to probably be gut-wrenching uh in the in the next couple days. So, anyway, good luck trading everyone. Uh it's uh be safe out there. Use protection. >> [laughter] >> Anyway. It's been fun live streaming from my living room. >> [laughter] >> Yeah, absolutely. Anyway, uh thanks everybody and thanks Kuppy. Yeah, thanks bros.
The Market Huddle LIVE With Kuppy
Summary
Join Patrick Ceresna Live from a remote location in Puerto Rico. How To Repair a Losing Trade: Register for FREE: …Transcript
All right, welcome everyone and thanks for joining us. I have the great pleasure of being with Cuppy Harris. Thank you so much for Hey. Glad you came over to my place. So listen everyone, we've got a great little live stream set up for all of you. We're going to take a a dive here into what's going on here with these markets. I am out here in Puerto Rico in Cuppy Castle. Cuppy, thank you for hosting me out here, buddy. This is This is just an awesome place. Hey, thanks for coming. It's long overdue. All right. So let's let's dive into this here, Cupp. So obviously the stock market has been challenged. It's been a very difficult distribution, but what's really interesting is that over the last let's say a few days even, this is really started to accelerate and I really wanted to kind of go through these charts and have a look at what's going on. Now, let's just start with the S&P, but we'll talk about the S&P afterwards, but just wanted to give context that we now have broken to lower lows. And we've we're now seeing a scenario where we're now breaking down to even towards the 6260. We can even head down to even 6,000 here in this type of a downdraft, but what's interesting is that it's happening obviously because of the escalation in the Middle East and we've we continue to see this uh uh escalate. Like we have crude oil here now back to 100 bucks on the upside. Now, what's your take on the situation? Is this a scenario where crude oil has another full leg higher? Do you think that the situation de-escalates or do you think that you know, we're heading to 120, 150 on the upside? Well, I think the situation in the Middle East is going to escalate. I mean, there's no off-ramps, right? Just thought it through logically, all the players need a a win. No one can just walk away with a like a truce and a handshake. I mean, the Iranians really really want to make it hurt. They want to make it hurt so bad that no one ever attacks them again. Trump just can't walk home. You know, there's there's no way to taco cuz Hormuz is still shut and our allies and friends need to get their oil and you know, urea and everything else out of the Middle East. The guys in the Middle East definitely don't want Iran launching missiles at them, so they want a solution. I mean, Russia's just sitting there laughing. I mean, every player in this situation needs this to escalate, so it's going to escalate. And yeah, I think trends in motion are about to accelerate in motion. So you know, the interesting part for me here is the fact that we're in a situation where obviously Trump has been trying to talk down the prices and basically suggest that this is all going to be over soon, but the oil markets aren't buying it. The thing is is that this is obviously causing economic stress as when I just pull up here the chart of gasoline futures, what you can see here is the we're now like at 320 a gallon. And this is this is obviously a huge tax on the economy and consumer confidence on that front. This is obviously spilled over into the stock markets. The question I have for you, how much do you think this is about the street versus how much the tight credit conditions and the and the breakdown in things like the private equity credit. What what would you say is the the primary driver here? Well, I mean, gasoline's all about the street. I mean, look, the crack spread were kind of bid before this even happened. I mean, the crack is I mean, look, I'm long the crack through refiners, but the but the crack spread's been bid. I mean, December 26th, December 27th, it's been upticking for 6 months now and this is just a reflection of that. I mean, everything all products are short right now and we're we're exporting [laughter] a lot of products globally now, which is which is basically just dragging the crack in the US up. But there's a lot of things being caused by these Middle Eastern things. A lot of trends in motion, but they look like good charts to me. They look like consolidating down, but you're the chart guy. I'm just doing the fundies. No, listen, the problem with charts is that you you can't really do technical Yeah, you you can't do technical analysis on on something being driven by geopolitical headlines really. So this is Don't you want to draw like a little pink box around that accumulation [laughter] there and have an arrow going up? That's how you guys do it. Well, listen, we could we could draw all sorts of stuff, but I want to draw it on some of the other charts. I want to start off here with the dollar. And what's interesting to me is is that the dollar has actually been strengthening in this whole period and one of the reasons this dollar strength has been so evident is because the Eurozone has been under huge stress. They're a net importer of energy, they're net importer of food and clearly this is impacting the European markets directly. And so the euro has essentially broken down some key technical levels and this looks like a flagging formation for a bearish continuation pattern on the downside. I'm at this point from the charts, this looks like the dollar is about to go on another rip completely driven by the the euro in the driver's seat. And but what's interesting is that we haven't seen that same deterioration in obviously the commodity driven currencies. The Canadian dollar, while it's weakened, is nowhere near you know, breaking down as badly. The Australian dollar, everything in the last little bit has been pulling back, but this is really setting up for a potential dollar breakout. Do you think that this is the kind of conditions where you're going to get a a dollar move? Are you bullish the dollar here or what's what's your position? I mean, I I have no currency positions. I I could see why the dollar would do up against the euro cuz Europe just sucks. I mean, they're going to be living in caves hunting mastodons by Christmas time, but the rest of the world, look, they're doing okay mostly. It's really interesting. So the guys short energy, you know, [clears throat] like Egypt or India, but those charts look like death. Korea, like you pull up some of these. Pull up EGP. Like it just looks like death. But um And then some of the other places, like if you pull up Brazil, sorry, that's not it. You pull up uh the BRL, so damn bid and it just doesn't care. I mean, it's it's like anything. You You just kind of want to bet on winners. Like look, that's a winning chart. >> [laughter] >> Yeah. No, you know what? These emerging market currencies have particularly the ones that have the commodities are doing very well and then the ones that are net importers are the ones that are getting killed. Like an example of of that is having a look at what's happening in India, right? Like they are Yeah, like in the end you saw a scenario where you know, they're predominant here. Where do I have it? This Here's the chart. And like we're we've basically seen the Indian economy or at least their stock market very badly hit by this whole Middle Eastern escalation. And so this is a one of these scenarios where it's a pick and choose which which of these kind of countries are the ones most impacted by the way the geopolitical situation is escalating. But overall, like the you you've were sharing with me earlier that you're still very bullish these South American countries, right? Yeah, of course. This is this is the Ibovespa and you can see that overall their stock market not only has been in a an amazing bull market, but it's actually holding up quite resiliently in spite of everything. Yeah, I mean, look, it's done well. Look, if you would have told me that what's happened this month, okay? So oils up, good for Brazil. Ags are up, good for Brazil. They just started a rate cycle the first time in 2 years, good for Brazil equities. And Lula's polling is kind of [ __ ] If you told me all four of these, I'd say the best would be up like 20% and instead it's down a couple ticks on the month and it just reminds you how you know, stocks are kind of hard sometimes. I guess you guys were positioned for this. But no, I mean, Brazil is my largest foreign country and LatAm in general. I mean, we own a bunch of Argentina too and I mean, they're they're just ripping. I love the trade. Now, Argentina has actually those been relatively flat for the since the start of the year, but overall, it'll be interesting to see whether or not it can bullishly get back above its moving averages and start trending. It's it's been kind of a a messy thing, but overall, the these emerging markets have been huge you know, winners over the last year or two and there's no reason not to believe that that they can't continue to be some good bull trend in all of these. Yeah, I mean, look, Argentina is the same. It's long ags, it's long energy. They they have some issues they need to sort out in terms of getting that energy to market and you know, same with the ags. But I mean, if you're bullish those two, I think it's going to do great. Um Yeah. I don't know. I'm bullish on Malay, so I just want to bet [laughter] on him. It's It's crazy what he's done. He's kind of gone out there and hacked away at it, and things are incrementally better, and usually get paid when things go from hopelessly [ __ ] to sort of shitty. You know, we In Argentina, we own a stock exchange, Bima. That's uh and that's that's been doing M&A in Argentina, BYMA. It's the sexiest chart you've ever seen. BYMA. Bolsa y Mercados Argentinos, yeah. Come on, that's not a bad chart. Oh, I mean, it's still in a bull trend. I mean, this is This is certainly good on the >> don't you? Yeah, you you can definitely draw the the horizontal triangle pattern that faces He's there with his crayons. It's early morning. He's just whipping them out. >> [laughter] >> The the choose some crayons here on these patterns. But, listen, like overall, I mean, the biggest challenge to almost all equities right now is driven by the short-term credit stresses, which is making tight liquidity conditions, right? And so, a lot of these stocks which have really strong bull themes are finding a hard time tracking short-term flows as everyone's waiting for seeing how this plays out. Let's Let's dive into this and talk about what's going on in these credit things, and then we'll translate it to how that it's manifesting on the different stock markets. But, I want to start off with obviously private equity credit has been a very challenging place. I'm going to use Blackstone and Owl as an example here to to just kind of get an idea of what's going on. But, like there it's been This is like a chart of death that's been happening. >> out on it. It's a giant head and shoulders. It just kind of fell out downstairs. >> What? Yeah, I'm going to put here on a weekly chart and just really uh really kind of show that chart. But, the the biggest one that's been killed is Owl. I mean, it's now back to like 2022 lows. This thing basically wiping out from peak to trough what is almost 70% drop right now that's happened in the last year. And so, this private equity credit is obviously a major stress point. They're basically freezing redemptions, making it all challenging. But, what was particularly interesting to me and what I'm looking for is what are the knock-on effects? And one of the more interesting things is that we've finally have seen corporate credit start to reflect this. And so, this here is the LQD, which is the investment grade, not the high-yield crap. And investment grade bonds have not only started to technically break down. We've seen clearly break the sideways consolidation to start a new downtrend. But, what's particularly interesting is the volatility. This is the the implied volatility in these investment grade bonds. We've basically seen the implied double on this as as the credit risk and breakdown as has everyone reaching for for the premium insurance on this. And so, you have you have a scenario now where where this is starting to break. You take a look at the way junk bonds have completely started to break down. You So, you have a scenario where what you know, one of the things Kevin always talks about is is that rarely like there's a lot of times where we have stock markets that will drop 5 or 10% and the credit markets do nothing. But, almost every time we have credit markets breaking down with the markets, that's the condition from which usually you have those 10 to 20% drops in the stock market. And so, the fact that we're seeing the the junk bond markets breaking down, you can see here this This is the implied volatilities on basically junk bonds. You can see also going from like 5% to 13% in just the last little bit. So, this is not just stock market stress, but we're seeing this really develop everywhere. Including, and this is the most interesting chart to me, which is This is the senior loans ETF. And so, you have these senior loans all having their faces ripped off. So, overall, even when we're we're going to talk some sulfur in a moment, but you're you're seeing a scenario where the credit markets are actually really stressed out about this situation, and we're now seeing that that this is starting to impact the entire intermarket relationships of how everything works. How do you size up these credit conditions? I mean, credit's a mess. I mean, these guys, as they always do, they made some terrible loans, and now they, you know, need to roll some of this paper over. Like it's like any Ponzi scheme, right? As long as more capital goes in than comes out, well, then everything's happy. And then, there's no equilibrium. And as soon as capital comes out, it just comes out way faster, and that's why everyone's gating because, you know, if you want to have price discovery on these loans, I mean, what what what's the fair market on a company that has, you know, no debt service capacity, and it trades at nine times EBITDA, but there's no cash flow, and it's like 14 pick with some adjusting [clears throat] coupon, and there's there's no confidence. I mean, it's obviously not marked at par. I mean, it's like 20 bid at 99, right? That's the market. And no one's going to pick 20 because suddenly they get a margin call because a lot of these guys have lines of credits that can lever it. So, that's why everyone's throwing the gates down. There's no one to sell it to except some of the private credit fund. I mean, I mean, look, even Apollo's gating. I mean, they're usually the guys you expect to pick up the pieces. So, >> Now, the question though for you question for you though, Kupp, is that you know, the the big debate is that can the private equity credit crisis be contained? And I think like when I think back to, for instance, 2023 when we had the regional bank crisis versus something like the subprime crisis back in 2007, one was contained, and the other one became systemic. And I think a lot of um the reasons were not necessarily that one was more severe than another, but rather about the fact that what was the market conditions overall in that environment. Back in 2007, 2008, we had oil going to 150 bucks. You had all sorts of other stress points developing that kind of built all of the stress that basically made a small problem probably far worse than than what it really was. The question for you here is is that is this something you think like the regional banks crisis like this will kind of resolve itself, or does this get worse? I think it's going to get a lot worse. I mean, a lot of these companies literally are not profitable, you know? They have some make-believe EBITDA number, but if they had to pay their employees cash as opposed to SBC, they're they're they're they're they're non-profitable on a cash basis. And you know, they have a bunch of terms of debt on them. AI is going to crush a lot of these businesses, and we're kind of entering recession as it is. I think a lot of these businesses, the equity's impaired, a lot of the debt's impaired. There's going to be tons of people laid off. I mean, where's the revenue come from? We We talked about this last night. I mean, AI is this kind of vicious cycle. Early in the process, you fire the 20% of people that are useless, and then your you know, your margins go up because you get rid of a bunch of SG&A. But, then those people don't consume, and you know, all your revenue is flat on its steps. It's kind of like a a race to the bottom. Can you cut enough expense before your revenue drops? And I mean, a lot of this stuff that the private equity guys own, they made terrible decisions. I mean, if you look at a lot of these books, it's either funny tech stuff that has no real reason to exist, but they just levered it up, or they went into the equity markets and overpaid for things at the top, and then put a ton of debt on it. And you know, if these things are still trading, they'd be trading at, you know, 30, 40% of what what they paid for it, except they put a bunch of debt on it. Or you have your typical story of some guy that went out there and consolidated all the HVAC in the state, and he paid, you know, 19 times the EBITDA for HVAC things that trade at three times usually. And >> [clears throat] >> none of these things have exits, right? And then private equity, as they always do, they just go in there and slash and burn murder the businesses. So, the business if you can't exit soon, it just gets less valuable every day. Um now, I think this is going to feed in. I I think I mean, when you think back, you know, I don't want to use like >> [clears throat] >> one example that like kind of guides everything. But, but think back to venture capital. I mean, there was a time when Uber and Lyft were basically free. It was like $8 to go home from the airport, and the taxi guy was 45. And I mean, Uber had what, like 50 billion of retained losses as venture capital funded, and then eventually they IPO'd the thing, and everyone exited. And you know, it was a good trade for them. So, everyone tried to do that model. Let's just gain market share, get bigger, get an equity offering off, get get thing listed. And so, you have a lot of these like VC sort of businesses that are not structurally profitable, and they ran out of equity funding because no one wants to put equity in at, you know, you they they basically double valuation every time they do an equity funding. So, no one else wants to put equity in. So, they're like, well, [ __ ] we can't I just think about 100 billion when it's obviously not worth that. Let's just do credit. So, they built all these credit entities to basically fund it and keep giving you, you know, free Ubers. Now, the business doesn't work, and the equity market's gotten a little smarter about this stuff. And so, if they stop funding these businesses with debt to fund basically [clears throat] free stuff for consumers to grow, then it all goes in reverse, and it just dies. And I think that's what's happening right now. They They tried to get retail to buy this stuff. I mean, remember when Trump was like, "Oh, you put your 401k in? That's great." And it turns out that retail is the smart money in the markets now. And retail looked at this like, "Nah, we're not, you know, buying some pig loans that Blackstone wrote." Like, "Nah." So, instead of putting in their 401ks, you know, everyone's dumping it. And then, you know, when you they're getting these vehicles, this isn't your Calpers of the world. This is your doctors and lawyers that are watching the news and they're like, "Get me out." You know, the Calpers of the world are still having a a meeting about when they'll have the next meeting to have a committee meeting about the next meeting. Like, "I'll put the redemption [laughter] requested in the fall." You know, then they can take their two months off for summer. [clears throat] Like, Calpers basically like Europeans. You know, they think they get like two good months for summer and there's another committee meeting about something. So, the real redemptions aren't even happening. I mean, this is just like the the the smart money doctors and lawyers who are the smart money and they're not going to fund, you know, your proverbial Uber giving free rides to, you know, Patrick and I. And so, these businesses have no value. There you go. So, let's let's pivot and go and now to the kind of government treasury bond side. Now, first of all, I want to talk about the Fed meeting and and Powell. And essentially, the market almost immediately took a a hawkish pivot on the meeting. And maybe it wasn't so explicit in the in what was actually said, but but clearly the market's interpretation of that was quite significant. And we were talking about those SOFR futures. I want to get to it in a moment. But I want to start by just talking about the probabilities here. So, the next meeting, odds are they're going to leave rates unchanged. But what's particularly one of the big moves that we've seen was going out to the end of the year, December 2026, where now the the Fed funds futures are pricing in a 22% probability of a rate hike by by the end of the year. Now, that's not I mean, still 72% chance that they leave rates unchanged, but we went from there being zero probability of a rate hike to 22% by year end. The interesting part is if you go to the end of December 2027, they're actually pricing in the greatest probability actually of one rate cut. So, you have a scenario where on the very short term, the market has gone full hawkish. Like, that that suddenly there's going to you know, be no action. They pulled all of these rate cuts out of the the SOFR futures and everything else. And and what now we find ourselves in a situation where everyone's worried about inflation. Now, I want to get talk about the SOFR in here, but what I want to ask you, do you think that the Fed is in a position to to do a rate hike? And if so, would that be extraordinary policy or like what are your what are your thoughts on which direction we're heading? Well, I think there's about zero chance they're going to do a rate hike. I mean, a good trader never says, you know, absolute zero, but I just don't see it. This feels a lot like 2008 to me where they were in a cutting cycle and then oil spiked and Bernanke was talking about maybe we have to go raise some rates here. And Fed funds actually started pricing in about 50 bips of rate hikes cuz the oil was moving. And then like two weeks later, Lehman failed and the bottom came out and they did emergency cuts. Like, in the end, this oil thing, it's sort of transitory. They were already in a rate cutting cycle. Things were kind of falling apart. I mean, SOFR the Friday before we started bombing them, like the the SOFRs were saying that we're going to do a couple a couple cuts. And like it was it was basically playing out that whole AI everyone's lose their job trade. And then oil started moving and this the SOFR started chasing it across the screen. But I just don't think this is going to drive a big inflation. I think that there's much more chance that it just kind of kills the economy like in 08. And like I think this is a great buy here. Full disclosure, I'm long the entire [ __ ] curve. I'm long these 26s, these 27s. I'm long tens. I'm even long 30s. It feels odd cuz I've never owned any fixed income ever in my life. I've always been like mentally bearish on it, but it didn't have a pay to carry. But Yeah. it actually feels like this stuff's all going to rip cuz we're about to have a depression. It's interesting because, you know, it's a it's a tug-of-war because A, obviously, higher oil prices and higher gasoline prices are going to definitely print higher PPI and CPI because it's going to have be a direct input. But the the Fed can't or doesn't have a lever from which to repair a supply shock. They can only control monetary levers in in terms of how much credit is in the system. And then you have the on the other end with this private equity credit and you can see what's happening here on high yield and and investment grade and all these other things. Clearly, credit conditions are are tight at the same time as oil is rising. And the market is seems to be far more focused on the impact of these higher oil prices and not in the fact that the credit conditions are tightening, which is is not monetary inflation risk. And and this is where I will agree with you completely that this is certainly a trade to fade. What's interesting though is that it was the big move. It was almost 100 basis points that we've seen in in the system. >> in it. >> [laughter] >> Yeah. It's it's it's insane. But what's amazing though is that no matter whether you go to the the rates markets in England, Europe, or Canada. Like this is the Canadian CORRA futures, which is basically the equivalent of SOFR out there. But also, you saw literally almost 100 basis points move. So, this was a rates move that happened, you know, out out not just in the US, but everywhere. They they obviously this is a big oil impact move. Now, you didn't see it as much on the 2027, which is the one we were talking about. I mean, it did drop, you know, more just a more than 50 basis point, but nowhere near the same as those 2026s. But overall, this this is a general shock to the system because literally at every spot of the curve, interest rates just went up. It's a it's a tightening of credit conditions because it doesn't matter what the Fed actually does. It's what the market is pricing in. And we just basically had rate hikes being priced in and credit now tightening. Yeah, look, I think we're going to do this for a couple more weeks. I mean, actually Friday felt like a hammer bottom in a way. Like we we took out the lows from if you look if you look at like 15-minute chart or something. We took out the lows the last couple days and then it just came roaring back. And I think it's the first time Yeah, that's the chart. I mean, look, it's a Friday. So, who the hell knows. But it was the first time that guys started pricing in a recession again as opposed to just the price of oil. It was the first time that it was almost tick for tick with the price of Brent. It's been chasing oil across the screen as I like to say. And I feel like it's the first time that people are starting to say, "Hey, wait a second. This this might not be so good." And when you start seeing some nasty jobs numbers in about two weeks or a month or something, I think they're going to start repricing SOFR, you know, to show it. You know, I think we're going to get a bunch of cuts. I mean, I think it's going to be like it's going to stall around this summer cuz has no direction. And then this fall, you got to start doing like emergency 50s because I really do think the economy is a mess. This is I I view this as one of the more asymmetric trades out there in a sense that they've already now taken all potential rate cuts out of the market and they've potentially even now pricing in some potential rate cuts high hikes, sorry. And the odds of them actually going through a hiking cycle is is very small. And so, at this moment, you probably have only a modest downside risk. The risk isn't zero, but but you have a modest downside risk and a huge upside if it swings the other way. It's the it's your classic prototypical lose small, win big setup. And so, this is just now a matter of figuring out when do these markets calm down and and settle in because that's right now they've been bleeding probably margin calls and other things that are causing some short-term stresses in the SOFR market. Look, I think this is a lot like in in 22 where a bunch of SOFR bros lost their shirt and they had a lot of PTSD from that. I mean, we went from, you know, worrying about can we create inflation to which transitory to J Powell chasing, you know, inflation across the screen and never catching it. And I think there's some PTSD there. I think Look, I've heard from some sources that a lot of SOFR bros had various trades on that all blew up. At the same time, you have the risk guys like, "Hey, the move index is up. You guys got to take some vol down." I think there's a lot of deleveraging, degrossing going on. I think there's a lot of warm pieces. I mean, I think also and, you know, this is kind of more speculative, but I think guys in the Middle East, I mean, they were long, you know, the back end of the curve like twos on outward. And suddenly they're like, "Hey, wait a second. We don't really need these twos. Like, we we really need the you know missile you know defense. We need this. We need this. So, let's go sell stuff. I mean, Friday was interesting because I think the sell order in gold finally ended. Whoever was dumping gold out of the Middle East to buy weapons finally is like cleaned up and it happened at the same time that a lot of fixed income went bid and I just think there's a big giant sell order out of the Middle East and those guys finally got enough US dollar to go buy the weapons they need. Look, they might reload again on Monday, but it it just felt like a cleanup print, you know, one of those boys need some missile defense. Yeah. No, absolutely. We'll we'll we'll talk about this gold chart in a second. I wanted to just touch on the fact that that this was really a move not just that in Fed funds in the short-term. Like, you can see obviously the two-year note just completely eating it on the downside. Uh but you then like the 10-year note dropped, the 30-year note basically got hammered. It was a general rise of interest rates right across the board, which is a credit tightening circumstance. And and so you know, the question is is that is in an economy that just got hit with a huge gas tax at the pump is now in a situation where accessing this credit is tight and far more expensive. And certainly this is the kind of stuff that in the end create some recessionary behavior on the other side. The bigger question though and I've heard you say this before, is this a a scenario where it would be a stock market decline that would actually be the biggest contributor to a potential recession? Uh like you know, a lot of times a recession was what would cause the stock market to drop, but is it now going to be the opposite where the tail wags the dog the [clears throat] stock market is the one that is actually going to lead this? I think so. I mean, look I think people talk about interest rates and money supply and all those things the Federal Reserve controls. But in the end, what's really driving the economy you know, supposedly K-shaped economy is the wealth effect. And if asset prices drop, people stop spending. It's as simple [clears throat] as that. We saw it in 2022 also. I think consumption is going to trail off a lot if S&P's get hit. I mean, right right now S&P's are down a little on the year. Like, who cares, right? You know, my dad's still on a cruise. But if S&P's are down 20% he's not booking another cruise. You know, he's going to start worrying about, you know, how he's going to be a retired guy. And I think that goes through the whole system and it goes really fast cuz everyone watches S&P's and look, we've had the petrodollar for 60 years basically propping up all our asset markets. They just keep recycling capital. And maybe we have the you know, yuan dollar you know, petro yuan or maybe they just put the petrodollar in reverse for a year as they buy weapons. But whatever's happening, I mean, I think the US has this undertone in the market. Retail's basically been eating whatever else is selling. Retail doesn't have the infinite capital to buy this. And as the war escalates, which is my view, I think guys in the Middle East are going to need to go hit their sovereign wealth funds and you know, cash in more chips and buy more weapons or you know, buy wheat or buy you know, other things that their citizens need. And you know, I think it's going to I think the S&P rolls over pretty hard and I think it hits consumption and that just leads to the recession we're all talking about. That's a nasty chart, right? I mean, maybe it bounces or maybe it just maybe it just wipes out. I don't really know. You know, the interesting part Cuppy from a technical perspective, what we have seen in commonly in the past is that as we approach major highs and this was like the pre-liberation day drop, the the market basically stayed heavy along its highs for many months, four or five months before ultimately breaking. And it seems like this was a complete deja vu where back in October, November we hit these highs and we basically went three, four months with the stock market being able to make no progress whatsoever on the upside and just roll over. Now, this is an interesting dynamic. I'm going to quickly go through a couple of charts here just to put everything in context. First of all, uh this drop has caused the spike in volatility. So, we we we got in that first drop that happened back at the start of March. Uh we had that spike up to about a 35 VIX. Well, we're back into the 30s here again. So, things are starting to once again accelerate on the upside of volatility in there. Even though realized volatility has been lower, we've talked we we were we were talking about that earlier. But we're in a situation where the stock market is not had any capitulation puke point. And usually what happens is that when stock markets start a sell-off like this, rarely do they just randomly stop with a 100 point down day. Usually there there's like a flush out big margin call that comes in and creates that liquidity event on the downside. Do you think that the risks are growing that we're going to have one of these big down days where we're going to be down like three, four, 500 points? It seems like every one of these drops has been this methodical 100 point down day and it's and the the buy on dip traders come in there to try to fade it. Like, how do you size up the the pace from which it's been declining and how this plays out? I mean, the last couple days have felt so orderly. It feels like someone in the Gulf has a VWAP order and they're just working it at 2% of volume on Spoo. It doesn't feel wooshy. It doesn't feel panicky. It feels like Americans keep buying the dip. I mean, as we know, like you get margin calls on last synthetic products that are sitting 10% below the market, they start blowing up. But in reality, I think you really have this petrodollar going in reverse and these guys are not price sensitive sellers. It's not like you're looking at this and saying, "Nah, it's getting a little cheap. Let me hold off on my sell tickets." These guys need to buy weapons. I mean, they're they're spoos. And you know, the Middle East is never, you know, super stable. Like, if they run out of wheat and corn and you know, all the stuff that their citizens want, like they're not exporting any, you know, oil right now. They they need, you know, to buy stuff. They don't have that revenue coming in. And the only thing they could do is sell this. I mean, the rest of their money's locked up in soft bank, you know, like they they they there's no way to get the money out, right? So, you have to you know, you have to sell what you can however you want to. And what they can is S&P's. And so there's a lot of trouble. Pull up Nvidia cuz it's it's the big dog and that one finally broke down. I mean, that's been basically 70 bid at 170 bid at 190 for six months. And I mean, you'd call that a head and shoulders maybe. I don't know. I'm not a chart guy. Yeah, you can you can jam a head and shoulders on it. And so now, you know, you got some resistance I guess at 170. Look, look I'm learning, Kev. Patrick, I'm learning. Look, I I I think this could break hard now. I think everyone has their stop loss in there at 170 and Look, I I think this could lose a lot. I mean, I think it's going to go ex-growth sometime in the next year or two and or at least the growth rate BO D cells to like 10%. I mean, you can't outgrow your customers and their customers are on fumes now being able to fund all this. There's no more buybacks. You know, there's no more you know, they they kept the dividend, but you know, a lot of their core customers now are going to the debt markets to fund data centers and at some point you just have to pull back. And you know, if you look at the analyst estimates to 2030, this there's no way Nvidia's going to hit those growth numbers because, you know, Microsoft and Meta aren't growing at the same rate. Like, it's just physics, right? And so I I I think this is going to pull back to a much more sane multiple. I mean, people always forget that semiconductors are cyclical. I mean, we've had a couple year run where they haven't seemed cyclical, but I remember 15 years in a row of Micron losing money and doing capital raises. Look, like you can't ignore gravity here. And look, Micron's a terrible chart, too. And so look, it's way too much capital in a super cyclical business that historically has destroyed capital. And I think these things will go back to trading at, you know, point three buck cuz that's what they're worth. Right. Right. Well, you know, the the interesting part and why this is the moment where things could accelerate is well, first of all, let's break it down this way. The Mag 7s have been distributed basically for the last six months. After, you know, their bull peak back in October, there's been that huge sector rotation getting underway and the selling of the Mag 7s was a theme that has just over and over again been there. But we've now seen the Mag 7s literally accelerate to the downside here. Nvidia is a key part of that. But but now the the bear market, the vicious part was in the software space. This this is that IGV and this has been this is the chart of death here. Like this is this has been an awful breakdown. Everyone got excited that there could be a low back in February, but look how quickly the software broke back down. So, you have the Mag 7s and the software being murdered, but what was holding everything together was the SMH. So, we had basically semiconductors that were taking all the flows. Everyone selling software, buying semis was was the rotation. What was amazing is that the semiconductor ETF, which 20% of its waiting is in Nvidia. Had a 36% run into the first few months of the year. You know, great bull right and Nvidia didn't participate at all. Right? And so you had a lot of the Asian ones working which was you had the Cosby ripping in one of the most extraordinary runs on the upside. But and this is the thing here the semiconductors held everything together. And yet now it's pretty clear we have some sort of a Cosby top. And you have semiconductors breaking down and Nvidia breaking that key support line. So now you have a scenario where it's no longer sector rotation without a software into into semis, but now you're seeing that actually everything is beginning to sell. And like to me the interesting part here is if we see the Cosby break below this 50-day moving average and start to really break down. If we see Nvidia not make a rebound and and stay below that 170 level, we now will have a situation where there's literally nowhere to hide. It's going to become a correlation one everything going down together kind of scenario and that's where things could really accelerate. What when you hear me say this do you what's your take on all of this and how would you size it up? Well, I think there's always somewhere to hide. But yes, I think the really over-owned sectors the popular retail places where all the hedge fund bros have been hiding out long. These charts look awful. I mean it looks like death. And then they've been you know shorting my names to basically buy more Nvidia. And so my name's doing well. Pull up Valero VLO. I mean pull up a five-year chart of that and tell me that's not sexy. Like zoom back a little. I mean Yeah. It's doing the [ __ ] coin trade. So maybe needs to pull back to 200 where it broke out. But I mean look at it to a bigger chart like consolidate years and then it's just going. And yeah look it's like a big consolidation it's just going. It's going for it. Like this chart that look great. I mean like look at Marathon MPC. This trades at like If you if you got some cojones, you could short the midstream out MPLX which they own two-thirds of and you're buying core Marathon at less than one times cash flow. Like that sounds cheap to me. And you know they're going to use it all on buybacks and give you a little bit of dividends. You know, look you want to know how hot this market is in the refiners? Valero set one of their biggest refiners on fire and the stock was up 10 bucks in the day. Like that tells you how hot the market is. Well, listen that's that's there's no denying that these energy plays have been you know running hot. The interesting thing cup that I was thinking is like obviously whether oil's up 20 bucks or down 20 bucks is going to be about whether there's escalation or de-escalation in the war. But you know, the the bigger puzzle to solve is did something fundamentally change in the energy space where there's like a regime shift because there were the bear market of energy for the last decade was all on the fact that there's no cap ex spending. Everyone's you know, oil is dead all of this kind of stuff. Now suddenly this is where all the money is flowing. This is the only place performing. And the question is is is even though there'll be some short-term volatility like if oil drops back to 80 bucks, of course there's going to be a small pause in in the advance of these stocks on the short-term. But do you think that there's a much bigger picture bull market getting underway in here that can last a prolonged period in this kind of like a regime change type of scenario? So I think oil and oil producers they're capped by the fact that this war will eventually end. No one knows when and how. So they're going to earn a lot of retained earnings before that happens. But in the end the the world just has too much oil. That's that's kind of my view. I was wrong I think on the cap ex side thinking that they were starved cap ex. I mean I think the technology has made it easier to produce oil faster and you don't need as much cap ex. Like I'm not super bullish Brent. So I think Brent might go to 200 or 300 or 500 who who the hell knows in the short-term. But eventually [clears throat] Brent's going back to 60. Like I think the the trade with Valero is that's where the bottleneck is. You can always produce more oil. You can't produce more refiners takes five to seven years. And so that's where I'd be playing my you know, intentions and I'm always scared the war is going to end tomorrow oil rolls over and dies. So that's not really where I want to be. I want to look at the crack spread which is moving out of control. You look at the D26 or D27 you pull it up. I mean D26 is at 31 right now. That's a damn good crack. Like you're talking that Prompt is over 50. Like Yeah. And so This is this is this is the Brent crack spread here. This is the standard. So the arb Bobby at Brent Brent crack though. And but it's it's at 25. Like this is still a highly elevated level. So these refiners have huge margins, right? Like it's Yeah, they're printing money. They're literally printing money on that. That's that's definitely the case. The big the bigger question though is let's go back to the S&P here though. So obviously energy is a huge benefactor. You know, it's funny how that echoes what was happening in 2008, right? Which is oil was going to 150. The energy stocks were up 70% at one point during that period while at the same time financial banks were down 50%. As the subprime was eating everything. So you had this huge divergence. But inevitably you know, when when the economy cracked even the energy stocks started to inevitably correct. The bigger question here is is like where and how far does the S&P go in on the downside now that we've corrected. So this is a weekly chart. Like are we going back to 2025 lows near 5000? Like where where do you think the S&P can go if this really gets out of hand? Well, I mean I think this war escalates. I don't think there's any off ramp. I think stocks get murdered. I mean why doesn't it go to 4000? I mean it's all right there's no rhyme or reason to this. I think you know so much of the equity market is tech and software and we know those are hurting and the S&P doesn't have a lot of energy in it to offset that. Look there's a lot of there's a lot of really good looking charts out there. Let's talk about some of the good stuff. Pull up Marax MRX. We're long this. We're also long Valero for disclosure. And pull out a little on the chart. Pull out do like like like go out all the way to the IPO like three years back whatever. Yeah. I mean look this is a good looking chart. I mean the stock jumped this week because they had their analyst day and they raised guidance and they they raised numbers. Look this is basically long vex. When things are volatile these guys print money. They're a commodities merchant. They're doing hedging. They're they're they're basically CPL. They they do all these things for commodities trading. When when volumes go up they make money. When spreads go up they make Um everything is all actually good. Back to K. You actually you know, accrete over time because they retain the earnings and pay a little dividend. They retain the earnings and buy some other players. This is basically what Vex and I think in a multipolar world you want to be structurally long volatility. I mean this is long volatility to me. It's a pretty good looking chart. You know, let's talk about SI for a minute. SI I It's had a little bit of a pullback with gold. But you got it there. SI I SI It's had a little bit of a pullback with gold. But like I think it's a good looking chart. It consolidated all summer and then gives it another run. I mean this is just a multi-asset manager. They're they're broad terms 1/3 gold, 1/3 silver, 1/3 uranium. All things I'm sort of bullish on. You know, they get some battery metals and you know, copper and all sorts of other [ __ ] tossed in there. Plus they they earn some incentive fees cuz they they run some portfolios that are incentive fee. And if you're in a bull market you get some incentive fees. I mean this is a stock that just keeps going. And look it probably got a little overdone when it got to 160. It's probably going to consolidate here. But this is not a bad looking chart. It's pulled right back to the moving average and I think you know, if gold bottomed this bottomed. I mean this is just a proxy for gold. This is basically high beta to gold effectively. You know, it's a large position for me. But look at as the price of gold goes up their AUM goes up because you know, they they have the funds you know, just appreciate in value and they get inflows. And you you get that double whammy. It's just I think this will eventually trade at a large premium to the royalty companies which traded a premium to the mining companies. And this still trades at a discount. So we own a lot of it. But I'm just saying there's a lot of charts out there that look good. I mean yeah, there's been some pullbacks. That's what happens. But where the capital is going to come out of the market and you know, in the in the tech names that are overvalued. I think they're going to come into these sort of names. I mean look this is like a low 20s sort of earnings multiple. It's it's not even expensive. I mean, the stock is up like what, three, four X in you know, 18 months, but it's not terribly expensive cuz the earnings grew faster. Yeah. Now, listen, listen, there's always going to be stocks that that are opportunities. So, thanks for for bringing these up. And you know, I think that uh >> Yeah, no, listen, >> hard. But you know what, but the that's that's a an important spin though to put on here, which is look, we're in the midst of a broader sell-off and that creates tight conditions that cause short-term risks. But but looking at it from a glass half full perspective, the biggest problem in in the market like three or four months ago was that everything was expensive and you're not able to get a lot of asymmetry in buying a lot of these markets that have already been at elevated levels. But when you have these kind of stock market washouts, even though there's short-term risks, this actually resets the system to allow the next major bull markets to happen where the really big money is made. So, you know, it's one of these scenarios where you know, you have to just be able to ride out the short the shitstorm on the short-term and and and then what on the other side of it is where the real money is made. Right? Like when all of these stocks are selling discounts. And so, there's going to be some really interesting bargains out there on on a lot of these different stocks that let's say get dragged down just because the selling widens and margin call forces people to sell [ __ ] that they shouldn't. You know, and and that's where you have to be ready to scoop things up. Absolutely, bro. So, let's talk grains here for a moment cuz we were we were mentioning this when we were talking and this is the weekly chart on corn. But what whether it's corn or wheat or the beans, we've seen this vicious three-year bear market that happened in in this space and and they're just starting to wake up. Obviously, there's a lot of the stress that's coming from the Middle East and the supply issues potentially of fertilizers and other types of things, but we're seeing these grains starting to to slowly wake up. This is like the first time for instance wheat has sustained a period above that 50-week moving average since really been in the bear market since the Ukraine war started. And so, the question here uh how much do you think food prices like these kind of grains can move if this if the situation if there's no off-ramp and things continue to be stressed, where can these things go? Do you have any ideas? Higher. Look, if I didn't know what If I didn't know what product this was, I'd be long just cuz the chart's so great. Yeah. But it's wheat and every time I ever trade ags, I lose money, so it's probably not going to work. But I'm I'm long some wheat and long some corn. I have the worst track record with ags ever. I'm just the worst at this. But the chart looks right and look, wars historically make ags prices go up. At least there's tons of disruption and you know, especially corn, which is really just a substitute for petroleum. Um it almost tracks petroleum and the input costs are all up a ton and now the output, which is corn, has to catch up to the input or else the farmers aren't going to do it. And it's happening at a unique time cuz it's planting season right now and farmers are in the final weeks of making decisions on what they're going to plant and how much they're going to plant of it. And fertilizer prices have gone crazy, their diesel for their tractors have gone crazy, but you know, the corn and wheat haven't gone up yet. And so, I think guys going to plant less. I mean, farmers ain't stupid and I don't know. I'm bullish, but like I said, I've never made money at these and so, I'm not going to make money. I would say that you could buy upside call vol upside calls like out of the money calls for nothing, like pennies. And it might be a better way to trade this cuz when wheat and corn move, they don't just go 50 cents. I mean, they go dollars. And so, you could buy like real tailly stuff, like you know, 30, 50% out of the money for nothing. It'll cost you a couple ticks. Absolutely. Like this is that's where a lot of the asymmetry comes in because you know, at these lower levels with volatility contained, you have a scenario where you know, the that right tail is being you know, priced very, very cheap and then and these things can always move far more than everyone expects in many cases. Let's let's slowly wrap up. We got to I want to just circle back to gold and silver. Um here cuz you mentioned it earlier, but I wanted to just touch on this chart. And like so, gold completely ate it in the last uh month. Uh it's one of the bigger drops that we have seen. Obviously, there was this parabolic melt up on the upside and and it's been a very challenging two months in being a gold investor. Uh the bigger question, do you think that this washout was already enough or do you think that this has started that this will still be under pressure from Middle Eastern selling or whatever is driving the short-term flows? Are you already a buyer here or you think that there's still risk here? I mean, I'm not a buyer here. I mean, I think it's a there could be more downside, there could be a lot more upside. I mean, I think long-term goes a lot higher, right? But look, that's a failed chart. It probably is going to make a you know, dead cat bounce and at least test the lows there at 4,100. And we'll see how it does at 4,100. But I don't know. Gold usually is a low realized volatility asset that trends and chops and backfills. And it just went from 2,000 to 5,500. That's a crazy move historically for gold. And you have to go back to the late '70s for such move like that. I think it's going to backfill and chop and I mean, there's a reason when you when you look at the Chinese who are huge buyers of precious metals, there's a reason they stopped buying gold. They started buying platinum and silver and copper. I mean, they all fill the same role as being stored energy and and debasement trades and >> [snorts] >> you even have stuff like zinc that's starting going up just because the Chinese said, I have $20 and let's go buy something. Let's go buy the laggards. You know, we missed the moving gold. Let's go buy the other things we can store where you can store value. And these weird things like zinc started going up. And you you kind of have this head-scratcher moment cuz a bunch of things that you can't store like you know, soybeans or pork bellies, like they didn't really get a bid. And the commodities you can store like zinc, like no one's really eating extra zinc right now. Like they they went bid and I just think as long as gold is expensive and some of these other things are cheaper, I think the incremental buyer and this is you know, sovereigns mostly buying this. I think it's going to be in other places where you see the bid. Look, I'm not I'm not bearish at all, but I have no position. I own my Sprott, that's my that's my trade. You know, I I capture all of these. That's why I like it so much. But no, I have no idea on this gold. If I had to guess, I'd probably think it just chops wood. Yeah. Well, you know what, listen, we're by the way for our listeners that aren't aware, we're live streaming out here in Puerto Rico. I'm Kuppy is giving me a great tour of the island over here. It's it's it's a great time. But but on Monday, we're going to see these markets and it's going to be probably quite a trading day in there. One of the the big things is there's that big JP Morgan whale put with all of that short gamma for dealers that is sitting just below or I should just above the market here. It's like near this like 6475 level. So, Monday is going to be quite the trading day. We're going to see what kind of volatility comes around whether there especially if there's some headline that comes in from the Middle East or something that could even spur this further. But certainly, this is a big downside move. Now, Kuppy, I'm just going to quickly give one quick plug here for for a webinar I'm doing. Like three weeks ago, I did a webinar on how to hedge a portfolio and we invited all our Market Huddle members to come on to a live webinar and those of you that benefit from that's awesome. I'm going to be doing actually a second webinar not on hedging, but rather on repair strategies and where I'm going to be just covering all sorts of strategies on how to fix positions that you're stuck on, how to change your break evens and how to fix trades without dollar cost averaging. And so, that's on April 7th at 4:00 p.m. You can there's going to be a link right now in this chat that's that's posted. Those on the live stream can just click on the link or otherwise just go to bigpicturetrading.com and you can register and join me for that webinar. So, please take a moment to register for that. And otherwise, Kuppy, you know, I always want to make sure that you have a chance to do a quick plug. Those listeners that want to follow you aren't, where can they find you? Where they can learn more about you? So, go to my website at pre cap p r a c a p.com. I host my blog there. It also has information about my fund. Unfortunately, I haven't been posting much on my blog, but I need to get back to it. And then, you know, I've been involved with KEDM for many years and all of you should go there and take a free trial. You know, right now the macro is leading everything, but it goes in cycles and we'll eventually be back to a cycle where you know, there's going to be tons of opportunity in the event driven side. Usually all the event driven bros become macro bros near the bottom and there's huge blowouts and all sorts of things you can do and you know, that's that's usually on the way back up and where you make the money is the event driven stuff. So, um I'd say go take a free trial there and uh Absolutely. What we'll what we'll do is uh we'll we'll include those links uh in um in the description there so that people know where to find you there. But listen Kupp, uh thank you so much uh for for joining us for this uh for this live stream. It was a great conversation and it's going to be super interesting to see uh how the this upcoming week plays out because it just feels like things are starting to crack here and so the volatility is going to probably be gut-wrenching uh in the in the next couple days. So, anyway, good luck trading everyone. Uh it's uh be safe out there. Use protection. >> [laughter] >> Anyway. It's been fun live streaming from my living room. >> [laughter] >> Yeah, absolutely. Anyway, uh thanks everybody and thanks Kuppy. Yeah, thanks bros.