Korea Mode

Social mood is imploding as indicated by the collapse of momentum stocks in July. U.S. semiconductor stocks posted their biggest monthly decline since October 2008 which was only the beginning of a much larger decline that would last five more months. Prior to that, the biggest semiconductor decline was in early 2001 at the start of the Y2K recession.

I will be the only pundit willing to say that the AI bubble is now OVER and yes the investment in data centers will continue long after the speculative market peak, as was the case in Y2K. The internet grew FAR more in terms of bandwidth and users after the Y2K crash than it did before the Y2K crash.

Speaking of recession, GDP was reported this week at 1.5% despite the 6% deficit and the 2.5% AI investment bubble. That is the most stimulus in U.S. history outside of the pandemic, for a mere 1.5% growth rate. Without that stimulus, GDP would have been -7% aka. massive recession.

In other words, this Trump economy is 100% smoke and mirrors. The tax cut and AI wealth is bypassing the majority of Americans who are stuck with higher gas prices, higher food prices, higher healthcare costs, higher interest rates and ever shittier jobs.

All of which is fueling rising rage as we approach the mid-term civil war.

At the end of each week my Twitter feed backs up with all of the angst of the week, causing mental overload. So I had to turn off the machines and go for a 10 mile walk to clear my mind. Upon mental reset, it was clear to me that political acrimony will dramatically escalate ahead of the mid-term civil war. So plan accordingly, and go for long walks to preserve your sanity, while everyone else is losing their mind.

While anger builds on both sides, the people around us are in no way prepared for the coming financial collapse. Mental health is already imploding, and yet these are still "the good times". All they can do is propagate the bull shit opinions of their own side of the political spectrum within their own echo chamber. They have no clue what's coming, and they are heading for a mental breakdown as a result.

In some ways the most perplexing aspect of this rampant delusion is the over-confidence of business leaders in Trump. It's clear that CEOs have gotten everything they wanted in terms of de-regulation, so they are willfully blind as to the cost this is imposing on the rest of society. The end result is tremendous complacency among business leaders at the apex of an epic AI bubble that is already imploding. This feedback loop between CEO sycophants and Trump is air tight, causing him to double down on failed policies such as the trade war and the Iran war.

This week, we learned that the Strategic Petroleum Reserve is at the lowest level since 1983 when it was still being initially filled, as we see in the chart below. Granted, most of this oil was used up during the Ukraine war to keep U.S. gasoline prices lower. However, the U.S. was not directly involved in the Ukraine War, whereas this new decline in SPR gives Iran huge leverage over the United States in the Iran War. It's only a matter of time before oil prices spike and remain elevated.

Which gets us to the Fed and the bond market.

This week after only Kevin Warsh's second meeting as Fed chair, the bond market had a meltdown over his lack of concern over inflation.

It's abundantly clear that Warsh is attempting to appease Trump by not raising rates, but the bond market is NOT happy.

If you add up the war risk with the inflation risk, it's clear that the bond market is heading for a meltdown. Which means that bond yields will likely spike higher before rolling over and crashing along with global stocks. But as we notice from 2008, bond yields did not stay low for long once the QE inflation machine started. Likewise in 2020, when bond yields collapsed and then rallied straight back up.

And amid all of this risk, what is Wall Street STILL doing?

Dumping record issuance into an imploding market.

The largest IPO lockup expiration in history is coming this week and it will be BIGGER than the SpaceX IPO itself which was a DISASTER.

"SpaceX may be reporting its first earnings as a public company on August 4, but an equally significant event happens just two business days later. That’s when pre-IPO investors will have their chance to sell nearly a billion shares of stock—far more than was sold when the company went public."

If you read the whole article, you will learn that the SpaceX float will TRIPLE in August over the IPO issuance.

In summary:

IT'S OVER.