#145 - The Death Of the Millennial Subsidy
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In this week's episode of Reformed Millennials, Joel and Cam talk Markets, the destruction of the millennial subsidy, lunch inflation, and why Tom Cruise is the greatest actor to ever live.
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Before stocks can start to go up, they need to stop going down.
That's step one.
The next step would be a series of higher lows. Mathematically, in order for that to take place, a stock would need to avoid making a new low.
When enough stocks stop making new lows, and put in the first higher low, that's when the market at the index level can stop falling.
We refer to that as an exhaustion of sellers.
Over the past few weeks, with new lows in major indexes across the board, we only saw a fraction of individual stocks making new lows, compared to before.
Now we're looking for an expansion of new highs to support the thesis that perhaps we should be spending more time looking for stocks to buy than time looking for stocks to sell.
With areas like Small-caps, Chinese Internet, IPO Index and Biotechs putting in higher lows, it's a good time to look even further out on the risk curve.
I feel these charts are a good representation of exactly that. The direction of these resolutions will tell us a lot about any risk appetite there is out there for these types of risk assets:
From All star charts:
💸Reformed Millennials - Post of The Week
THE CURRENT EARNINGS SEASON IS COMING TO A CONCLUSION. THE LATEST THEMES:
The resetting of expectations continues with full force, especially in the tech sector. Companies are either missing estimates, guiding lower, or both. The silver lining is they have managed to lower the market expectations so it’ll be easier to surprise in the future.
The impact of Inflation is not distributed evenly as of now. While Walmart and Target said that costs have gone up more than expected and their customers have changed their purchasing habits due to higher inflation, Nordstrom and Williams-Sonoma pointed out that their clients are not having those issues yet. It only makes sense. Higher inflation typically hits first people with less income.
The most heavily shorted stocks are missing estimates, gapping lower, and then squeezing higher. We saw that in companies from various sectors – USPS, DKS, BROS, etc.
This is a normal part of the market structure. Every share that has ever been sold short will have to be bought back at some point. High short interest can be a source of solid future demand.
In the meantime, anything related to energy continues to be among the price leaders. Oil & gas stocks went up about 20% across the board last week as natural gas hit 12-year highs. Lithium stocks have also been on fire as it is needed in the clean-energy space – LTHM, ALB, LAC, SQM.
As for other thoughts and charts from people smarter than me: (charts 1 & 2)
JC says don’t be short if the S&P is above 4,100 which it closed on Friday.
Technical wiz Jon Krinsky pointed out that China's internet may be bottoming: (1)
And energy seasonals generally peak around here (my interpretation is trying not to chase energy.
🐦 Twitter Thread of The Week 🐦
Money rules from Danny.
My favorite - Never let money interfere with relationships
🎬 Video of The Week🎬
From the All-In Summit in Miami - FiveThirtyEight's Nate Silver on how gamblers think.
🔮Best Links of The Week🔮
Financial Times - Allan Lanthier: The small-business tax mess — Ottawa should start over from scratch
All-In Podcast - Glenn Greenwald & Matt Taibbi discuss the new political divide, moderated by David Sacks
Wait But Why? - The Big and The Small
Tech Crunch - Affirm teams up with Stripe as the BNPL wars intensify