2.23.26 morning subspaces

The transcription discusses various financial topics, including signals from treasures and mortgages, yield curves, market volatility, cryptocurrency prices, equity evaporation, gross and net book exposure in trading, and the impact of monetary policy on markets. It also touches on specific financial instruments like NVIDIA, semiconductor stocks, and mortgage rates. The speaker analyzes market movements and trends, highlighting the interplay between different factors influencing the financial landscape. Good morning and welcome to Subscriber Spaces on Polarity Radio, recorded and reposted until we're able to have it immediately broadcast through Polarity Radio's website. It is wonderful to be with you. We survived a walk where the snow is higher than the height of this pug's legs. We had to go here and there. We're in the street before the snowplow came. It's sticky and, well, my windshields are clean now, but it is very, very interesting in New York. Let's get right into it. Treasures are the most important signal. Obviously, mortgages are the most important force, but treasures give you signal because of its angular nature. It's a curve of sections. Mortgages do have a curve. They're trying to take the implied yield of the different average lives, of the expected average lives of the different coupons. That's why they bunch them together in coupons of 50 basis point spreads, but there's a lot of discontinuousness and, as I mentioned, when you go from one coupon, say, apply to a four-and-a-half as the primary, the on-the-run, the to-be-announced, the mortgage where people are putting their mortgage into those pools, you'll have a spike down in yields when you go from five to four-and-a-half, and the reverse is true, and the reason that is is because people just don't want their mortgages refinanced. They don't want to buy something above 100 cents and get 100 back. So people pay that premium just to come in to the lower coupon and just, you know, offer down the rate, but that being said, we look to the treasury as the most calibrated signal because you just have these yields, multiple decimal places, more precision in the duration of the calculation, and today we have a new kind of local flat. I put up in the nest the two-year, three-year, it's a $7 trillion section. It's not spaghetti rigetti, it's not talent here, it's not a corporate bond, it's not Oracle Credit to Volkswagen, it's $7 trillion. It's bigger than any stock in the world, it's bigger than NVIDIA, and we're at 1.1 basis points. Do you really think, using an analysis of shear stress, you know, wind shear when you're in a plane, they say they're worried about wind shear, a quick downward thrust in wind on one part of an approach that could cause disequilibrium of the plane. It's just like a liquidity gap in markets where there's just downward force on a price and you're involved, like, we have a little bit of wind shear in Solana yesterday, in Bitcoin, and now the lemons are back in their bind and they're so excited, I imagine, I imagine that they're saying, you see, you see, it was only a Sunday dump, you see, we're back. Well, let's see how far back you get. And again, we have elevated volatility, a $10 move in Bitcoin is unsurprising to me, which is why when I covered on February 5th, between 6 and 7, I didn't have an interest and take the long, the short, it's just too much, I'd like vol below 50 before I get involved, and you can just move that thing around, and people have nothing better to do. Let's take a little look at some of those crypto prices. But it's amazing to me, you know, we have the 210, and we are now obviously below the April spike of last year. So we're going to trade under the peak of Liberation Day, and 53.1 is the 200-day moving average on that curve. And remember, we moved up from the over-easing, driving of the dollar down, all that natural organic money pressure showing up in credit demand, sovereign demand, balance sheet expansion. And if you go back to January 13th, when the yield peaked at 4.89 last year, we had a 42 percent change curve. So our levels at 59.3 have this, so below the 50-day moving average, we have 53.1, which is about six basis points, six bunker basis points lower, but if we can go down six, we'll undertake it over the next couple of days. Oh boy, one second. Oh boy. Oh, jeez. Okay, I'll just go check one thing quick. I'm not going to help, so I'll have to deal with that later. All right, so when we always talk about, on the yield curve, we like the low yield, we like the faster yield, so we like the low yield and something a little longer than it. It's because we want to be in what's strongest and our counterparty at its weakest. It's that wave of equities, you know, when you're trading FANG on the long side, when you're trading FANG on the short side, you like what's weakest. Now, obviously, you calibrate that to the market cap, where, you know, matter going to a low would not be nearly as important of a signal as Microsoft going to a reaction low, because when you think about the system, we have a gross amount of exposure in the system, which is all the longs, all the shorts, the total forces, okay, but amongst all those forces and all the positions and all the risks people take on with their gross book, there's the net book, and some people think the net book is what's important. It's both, because two things aren't the same when you're on opposite sides of the trade. I don't know how that happened. But if your gross book is fixed and the equity decays, like we lost $50 billion in crypto overnight, so $50 billion lost there, but NASDAQ just surrendered the gains they had, or a significant part of the gains they had from Friday. The trade below Friday's low, you know, and then not far below the prior local low, that's just all equity evaporation, but the gross book is there. It's not that prices are going down because people are degrossing or reducing their total exposure. That could happen, it's just not what's happening right now. You don't have people saying, oh, Bitcoin's a problem, let me just sell it and get out what I can. That's not happening. It's stock to DCA. You know, you calculate a better entry point to lower average price and reduce our ratio of equity to our position. There are people DCAing at a loss. They're just taking bigger positions and they're bringing down, in some cases, they're bringing up their average cost, okay, but in most cases, they're bringing down their average cost because they're just at a loss. And while the difference between the price and their average cost compresses and their risk is growing, because if you're dollar cost averaging and something's actually going to go up, well, then you'll recapture your differential between your cost and your current market price. Well, that doesn't seem to be what's happening and people just think, let me just average down and then I'll be able to just exit. If everyone's doing that, who's going to be the buy? And you have more and more of these whale exits because they're getting out and they actually have a big gain. So that's the story. We have $7 trillion, okay. So now we bounced three ticks. We're at 1.4 basis points. There's a bad print on the chart showing that we were significantly higher on the 2-year than having a big, we went to inversion. We did not. Those aren't real prices. But the RSI of the 2-3 is the 2606. We don't have anything lower than that going back until the shift from adding 25 basis points of hikes starting March 17th, May 5, and was it June 18th? Let me get that on my brain. Let me get that on my brain. June 16th. Juneteenth is, so the hike of 75 basis points preceded the peak of NVIDIA by two days, everyone. Are you noticing something? NVIDIA could not handle that first 75 basis point rate cut. And then it just melted down. You get a trillion and a half dollars of QE, or relative QE because we had a trillion of QT that's gone plus a half. On top, that's easing. We do 250 basis points, 230 basis points of easing, realized and implied. NVIDIA couldn't handle it. So when you wonder why I think NVIDIA is not worth 100, it's not worth 50, it's because we got to 99 without the help of hikes. We got to 99 on its own, Liberation Day. And then they just dumped a lot of Hopi, Unstimmies, Altman, easing, cutting, QEing. Okay, well, what happens when you run out of that room? So the semiconductors are levitating. Today, there's a microscopic convergence. But, you know, if we add up the two-year, three-year, and the three-year, five-year, we're now at 15.6 basis points. We're a little less. But when we take out the convert, when the curve is inverted, remember, the five-year is underneath the fifth hundred, okay? And, well, actually, it's now 1.3 basis points above. It's 3.63, 8.06, 2.5. Okay, but that 2.5 is at 15.6. Then we take that out, extremely likely to get below the hundred. We'll bring the mortgage rate under six. The FedEx will bring the adjust rate closer to five. One of our people yesterday showed us a picture, or one of our soon-to-be people, hopefully, showed us a picture of a 399 mortgage advertised with a 4.67, because it's only subsidized for a short period of time. But, you know, a teaser rate to get into housing. Let's look at some, you know, 60 basis points down, and I think only 15 basis points of conversions. Wow. And so we did have Empress Holiday yesterday overseas. The FTSE is up. Their yields are lower. The DAX is down 57. I can only imagine what SAP is doing. Not really a stalwart, but great capital preservation. Let's just SAP. We're down another 2.5% today, approaching a low going back to June 1st of 24. June 1st of 24, so you're talking about two years. Okay. And that was 15% of their market. So, you know, we get a little deflation of our innovation companies, which are a much bigger share of ours than these other countries, because they really don't have that kind. So we get deflation, and our market will go down. But then the dollar will go up, because as we have more yield weakness globally, we'll get policy accommodation internationally in G7. So the German 10-year is – and, you know, we have the Japanese yields closed, but we're close to six months on here. We have to go back to December 1. We have to go back to November to get a lower rate. Okay. And then we'll have to go back. Once we get – we'll have to go to November – so we have a – yeah, the September 17th and the October 31. So we do have work to do, but we're about 40% of the way in the year range, and the German and the UK is a mess. If only the Trump administration realized they just have to get these NASDAQ stocks softer to be able to get mortgage rates down. Anyway, does anybody have anything to say about – so our main takeaway is that we had some overnight softness. Some overnight softness – you could move these things around. The volatility was elevated. We're – we are at 66, 222. We're well inside that post-segregated peak, immediate range, a little below – no, it's seven – we're a little above midway, but we're more than 40% – 38.2, more than 40% down in its range. We have Solana surging to down only 2.71 over $50, but we did take under on a trading basis that consecutive inside weeks – inside week is when an asset trades inside the range of the prior week. A double inside week is more rare, and obviously a triple inside week is a problem. But all of these things traded below the low of – below the low of the prior two weeks, and so getting us below 59,930 obviously is another one of these examples. This is a much weaker consolidation phase than the nine weeks we had after the sell-off of October 9th, 10th, going down into November 16th, when we had a low at 80 at the prior kind of support level. But now we just have a much more Kaiser-Wilhelm II type of just anemic, fragile, just red candle, six in a row, microscopic here, but trying to make progress. Strategy is holding up wonderfully at 127, and that would be below the lowest weekly close ever, or, you know, since – since – no, I'm going to go back earlier. Nope, earlier. Going back to March 31 of 2024, so that's, you know, that's before the easing. That's when FMCI had its peak, and then we followed that with a five-year peak. I think it was to the April 31 that we had the five-year peak. Anyway, so we're losing a lot. We have iron trading below its lowest close for a week, going back to, let's see, 39, 31. So we do have to only go back to the rate cuts. The rate cut initiation was September 17. So we'll be able to – a little more weakness, you'll be able to cycle through the cuts, and as I said, cuts are most effective in an inverted curve at a high level, just pure money pumping to the banks. Mid-cycle underseedness, benign, you'll have things, you know, garbage piles in my view, like iron, unserious entities. And obviously, we have the strategy of Bitcoin doing much worse. Iron has a story, it's a liquid, whether it's a pumper based on, you know, a story or something there. But, you know, something that was $5 doesn't belong to $50 in its same year, and I expect it to just stay there. That's an unserious view. So is there anyone that wants to do something quick before we jump over the Murray or New Falls days? I can hardly fly and move. I can be less. I can have everything set up and just start. That's – what is it? Today is 23, 5 and 31, 37 days. 37 days of drama, and then we have weekend days, 5 of those, that's 10. Yeah, I think we have no holidays. It's probably 27 more of these crazy days. Okay, who's got a question? Anybody? Anybody? What's that? Okay. Sarah Jessica Parker's husband is Matthew Broderick and Bueller. Bueller? Bueller? He actually looks like a speechwriter. I don't know if it was Nixon or Reagan. Bueller? Bueller? So we're getting close. We're getting close. Just let's take a look at the NASDAQ 100. We're not interested in the QQQ. It can move around too much because of the – it's an ETF. But the low close is 24, 584 – okay, 548. So – oh, and we – but we do have a 24, 6, so it's 200 – it's 300 and 53, so one and a half percent lower. So we're getting close to a three-month low. That's kind of top of the action. We had a lift yesterday, but they really don't want to try to hold it. But they really don't want to try to hold it. And when to do that – I hate the problem. But, you know, there are people trying to buy Bitcoin. There are people buying the calls because they think it's cheap. We did have Ethereum down. It's a nice little – 1844, so we're $84.06 in it. But the stuff does look weak. Okay, so we have nothing. We're going to jump over to Mario, and we'll be trying to do this program starting in the morning before then, and then I can take care of things and then go in open space after Mario. Well, thanks, everyone, and I hope we're all feeling the organization of the system with the curves flattening. And remember, a curve to me is a volatility. It's a Vega. It's a confidence. It's a suppression. It's a kind of a hopefulness of the future, an excitation, and we will be ringing all of that out because we're in a bear market, and we've been in a bear market since – whether you want to call it an abstract deflationary bear market, either observably contractionary on July 10th, 2024, or earlier when it slowed down its outperformance to below its normal outperformance of 20% extra. Or you can just go back to July 28th, 2022, when the Fed was unable to maintain their trend of adding 25 basis points per meeting to the tightening, even under we just had a 9.1% inflation, there's no reason under the sun you would get a 9.1 new cycle high print and then say, you know what? Never mind. I'm not going to go to 100. I'm not going to take that double to 120. So they're gutless, but we know what they're doing, and we're winning, and we're going to win very hard as long as we calibrate ourselves small. It's the most risky time of the transition where everyone's moving things around. You're not getting progress. But when we can get our inversion on the 2.3 and a particular inversion on the 3.5, it's a much lower mortgage rate. It's a much higher curve flattener. It's much more negative for the banks. We lose XLF within the – XLF, XLC, XLK. That's 50% of the market when you add an Amazon approximately. So thanks all for joining us, and we'll see you on Monroe.