Month: August 2024

The situation in the already restive and tense West Bank has exploded overnight, following major Israeli military raids into the Palestinian territory involving hundreds of IDF troops.

Three areas were targeted simultaneously in what is the largest security raid on the occupied West Bank in two decades. Even fighter jets provided support on the assault on Jenin, Tulkarem and Tubas – and drones and bulldozers were seen operating as well. The ongoing operation impacts an area of some 80,000 Palestinians total.

At least ten Palestinians have been killed, including three after a targeted drone strike on their vehicle.

Israel’s military has said that the nine deceased were “armed terrorists who posed a threat to security forces.” The IDF further said “wanted suspects” have been rounded up in in Jenin and Tulkarem, and that IEDs have been uncovered and dismantled.

While much of the Gaza Strip has seen frequent evacuation orders due to the over 10-month long IDF anti-Hamas operation there, Israeli leadership is controversy mulling potential evacuations for parts of the West Bank.

Large-scale evacuations would be an unprecedented move in the territory which is administered by the Palestinian Authority (PA).

lsrael launches mass military operation in northern West Bank.

Late last night, the lsraeli occupation forces announced they are to launch a large-scale military operation targeting northern West Bank.

Among the areas targeted are Jenin, Tubas and Tulkarm, which were indeed… pic.twitter.com/iCl06MVFKk

— TIMES OF GAZA (@Timesofgaza) August 28, 2024

Foreign Minister Israel Katz on Wednesday said “We need to deal with the [terror] threat exactly as we deal with terror infrastructure in Gaza, including the temporary evacuation of Palestinian civilians and any other step needed.”

Palestinian officials and activists have warned that this would be a form of ethnic cleansing – given also that already in many of these areas Jewish settlers have moved in as part of efforts to take the land for Israel.

Katz said a full evacuation would be justified to disrupt alleged Iranian smuggling networks. “Iran is working to establish a terror front against Israel in [the West Bank], according to the model it used in Lebanon and Gaza, by funding and arming terrorists and smuggling advanced weapons from Jordan,” he said on X.

Israeli occupation forces block the entrance to the Jenin Governmental Hospital in the occupied West Bank, amid threats of an imminent raid of the hospital by the Israeli military. pic.twitter.com/dOhcYDRNDR

— Quds News Network (@QudsNen) August 28, 2024

Already a strict curfew has been declared in parts of the West Bank where Israel’s military is operating: 

Kamal Abu al-Rub, the Palestinian governor of Jenin, said Israeli officials had informed their Palestinian counterparts that they were imposing a formal curfew on parts of the city. Israeli forces were surrounding the city’s hospitals, entrances, and exits, he said. “People are living in a state of terror and anxiety,” Abu al-Rub said.

The Jenin governor has also described the IDF operations as “unusually fierce” after gunfire and explosions rang out over the territory overnight.

The three targeted territories are also home to sprawling refugee camps, hosting the displaced from other parts of historic Palestine…

But Israeli leaders have said “this is war”.  Agriculture Minister Avi Dichter has been a notable figure to back Katz’s call for West Bank evacuations, telling Army Radio that “if we ​​have to evacuate people in order to keep our soldiers safe, they will be evacuated. They are not being sent abroad — they are being evacuated and after that they will return home.”

After Robert F. Kennedy Jr. dropped out of the presidential race last week and threw his support behind former President Trump, several states have refused to remove his name from the ballot after he announced he would do so in about 10 swing states.

“Our polling consistently showed that by staying on the ballot in the battleground states, I would likely hand the election over to the Democrats, with whom I disagree on the most existential issues,” Kennedy said just before endorsing Trump, Insider reports.

Three key states have dug in and are refusing to remove his name;

Michigan – a key battleground state, said it was too late for Kennedy to withdraw as the nominee of the Natural Law Party.

Wisconsin – whose Elections Commission voted 5-1 on Tuesday against removing his name, citing a law which says “any person who files nomination papers and qualifies to appear on the ballot may not decline nomination.”

Colorado – which, while less competitive for Trump than Michigan or Wisconsin, also refused to remove Kennedy’s name.

“Minor party candidates cannot withdraw, so his name will remain on the ballot in the November election,” said Cheri Hardmon, a spokesperson for Michigan Secretary of State in a statement to the Detroit News.

“The Natural Law Party held their convention to select electors for Robert Kennedy Jr. They cannot meet at this point to select new electors since it’s past the primary,” she added.

BREAKING: Following Michigan’s example, the Wisconsin Elections Commission just voted 5-1 to keep RFK Jr’s name on the ballot against his will

Out of nowhere, Democrats have frozen all efforts to remove RFK Jr’s name from the ballot. However, they still want him removed from the… pic.twitter.com/InoZ6LqKqX

— George (@BehizyTweets) August 27, 2024

Nevada notably allowed RFK Jr. to remove his name after his legal team came to an agreement with DNC lawyers who were suing to keep him off the ballot.

As The Conservative Treehouse notes;

RFK Jr is gone from ballots in the battleground states of Arizona, Pennsylvania and now Nevada.  Not Michigan and Wisconsin.

Florida, Texas and Ohio have also removed Kennedy, but those are generally Red.

The state to watch is now North Carolina, where ballots would have to be reprinted quickly if the RFK Jr intent is to withdraw.  The Kennedy team have not requested to remove their candidate from North Carolina.

(VIA NPR) – “Robert F. Kennedy Jr. has been nominated by the We The People Party as that party’s presidential candidate to be listed on the ballot,” North Carolina State Board of Elections public information officer Patrick Gannon said. “That party has not informed the State Board of any plans to change its nomination.”

Gannon said that if We The People withdrew Kennedy’s nomination, state officials would have to consider if it would be practical to reprint ballots. As of Friday, nearly a third of North Carolina’s 100 counties had started the printing process. (MORE)

* * *

In a Tuesday interview with Fox News, former RFK Jr. running mate Nicole Shanahan slammed Democrats for their treatment of Kennedy – telling host Jesse Watters that the party is losing its moral compass and abandoning its foundational principles of dignity and respect (lol).

“This is wild. I’m asking myself what happened to the party of when they go low, we go high. Cause right now they’re just going lower and lower and lower. And I’m shocked. I’m saddened. I’m worried for them, honestly. They’ve lost their soul. They’ve lost their direction. And, you know, if you’re going to pick a target, you got to pick it a little bit better,” she said.

“Robert F. Kennedy is one of the kindest human beings I’ve had the pleasure to get to know. He said it the other day, he was like, I don’t have a bone of revenge in my body. This is somebody who’s been attacked over years now from all different angles,” she continued. “Big Pharma’s come after him harder than just about anybody. And I have to say, Bobby shows up with grace every time.“

By Michael Every of Rabobank

Tomorrow, back to only thinking “Rate cuts!”

Today, markets are only interested in one economy, one field, and earnings from one company, which may or may not be in a bubble. It makes a change from a focus on “Rate cuts!” I guess. But in the real world, there’s lots to think about, politically.

Germany: After Monday’s IFO warning the economy risks a “crisis”, Tuesday’s consumer confidence (-22 vs. -18.2 consensus) and Q2 GDP data made the same point. The latter was -0.1% q-o-q, 0.3% y-o-y as expected, but only due to a 1.0% q-o-q surge in state spending to host Euro 2024. By contrast, private spending was -0.2% q-o-q and capital spending -2.2%. Pundit Gary Lineker once said in football, 22 men chase a ball for 90 minutes and the Germans win. Not anymore, and in geoeconomics, ‘24 men and women chase the ball endlessly and the Germans lose. Indeed, in September, key state-level elections could see the far right AfD and far-left BSW win over 50% of the votes between them: and we are just 13 months from federal elections, which could leave Germany ungovernable – not that the government they do have now is winning many plaudits from voters.

France: President Macron’s refused to see a left-wing government emerge from the new fractious National (Dis)Assembly, as one of his key allies suggests the president break constitutional precedent to propose a new prime minister himself: so, as things burn, it’s time to fiddle? Even if the New Popular Front (NFP) leftist alliance splits after this veto, it’s still hard to project a stable coalition involving the mainstream Socialists and right-wing parties. Or one popular with voters: the NFP has accused Macron of “opening the door” to the presidency for Le Pen. Elsewhere, Macron stated the arrest of UAE/St. Kitts/French citizen and billionaire founder of Telegram, Pavel Durov, was apolitical: yet potential cyber-crime charges are that the platform is used for illegal activities, and Durov won’t allow French authorities to monitor it. Again, Europe and social media monitoring and/or censorship are news. Telegram remains a favorite of the Macron circle even as the security of its messages is being called into question: if it is hackable, what might this show those who did? Meanwhile, showing how world power is rapidly shifting, the UAE made an official protest demanding access to Durov, and freezing military cooperation and the planned $19bn purchase of 80 French fighter jets.

US: Special Counsel Jack Smith re-charged Trump with interfering in the 2020 election after his first try was gutted by the Supreme Court over the issue of presidential immunity. Usually, no DOJ charges are filed so close to elections so as not to look political: Trump alleges this is the latest attempt to interfere in the 2024 election. A court hearing on the scope of presidential immunity, of vast constitutional importance, is needed: yet even if the related ruling is against Trump he will appeal again, and this issue won’t be resolved pre-election. Meanwhile, former Democrat Tulsi Gabbard has joined Trump alongside RFK, Jr; and many former Republican presidential staff have joined Harris, as a major political realignment continues. Re: the big day, Michigan and Wisconsin election boards say RFK must stay on their state ballots despite him dropping out to endorse Trump; Cornel West has been removed in Pennsylvania due to a Democrat protest, but stays on in Michigan after a judge overruled a similar appeal; so does Jill Stein of the Green Party, for now; and allegations and lawsuits over the rules under which the November 2024 vote will be held are already flying. Worse to come, it seems(?)

UK: UK Starmer, only in office for two months, yesterday had to defend his government against charges of cronyism, saying he just wants “the best people for the job” (who are Labour supporters or donors?) Ahead of an October budget we are told will hurt as it repairs years of damage under Tory leadership, former BOE MPC voter professor Danny Blanchflower, who backed Labour’s platform, now tweets: “Prove me wrong but @uklabour have no clear economic ideas at all.  How is social cohesion to be restored?  Where are the plans for restoring public services, building libraries, swimming pools, nurseries, schools and hospitals, hiring social workers and teachers and doctors and nurses and community workers? How to help the depressed young. They have NO VISION” We shall soon see, of course.

Australia: Monthly inflation data, which like foreign beer sizes, Aussies are still not used to, saw July’s headline drop from 3.8% to 3.5% y-o-y, but still a tick higher than expected. The trimmed mean was 3.8%, down from 4.1%, and core CPI 3.8%, down from 4.0%. Food was 3.8%; alcohol and ciggies 7.2%; clothing 1.9%; housing 4.0%; household furnishings -0.9%; health 5.3%; transport 3.4%; comms 1.9%; recreation 1.1%; education 5.6%; and insurance/financial services 6.4%. As the Aussie press puts it, a two-speed economy is evident ahead of next September’s federal election. If you have kids to educate, places to go, and insurance, food and booze to buy, you may worry; if you think “sofa, so good”, and like to dress up, chat, and recreate, you are more optimistic.

Japan: Saw a Chinese military plane breach its airspace for the first time ever, underlining rising regional tensions. In domestic political tensions, the race to become the new LDP leader is hotting up, with a large number of candidates whom those outside Japan can only pretend to know anything much about fighting to take over leadership of both the party and the country next month. Then the old issues of fiscal vs. monetary stimulus will need to be addressed.

China: Beijing hosted US national security advisor Sullivan, whose arrival at any geopolitical scene can be taken as a harbinger of failure as much success (see his pre-October 7 prognostications on the Middle East, for example). Apparently, Sullivan wants to try to “Trump-proof” US-China relations in advance. Good luck with that. Moreover, even as he arrived to smooth ruffled feathers, the ‘US military is open to escorting Philippine ships in South China Sea amid clashes with China’ – says the head of the US Indo-Pacific Command. Did someone not tell Sullivan in advance what the Pentagon is thinking, or was he hoping there was a way to sell this policy to Beijing? Tellingly, a prominent Chinese academic is warning that Asia is “rapidly sliding towards war” and the US is to blame for the region risking a “powder keg”. It’s a good job Sullivan, who China knows might be out of a job in a few months, is on the job…right?

Other than that, enjoy the US earnings data! Then tomorrow it’s back to only thinking “Rate cuts!”

Shares of Super Micro Computer are down over 15% heading into the cash open after the server company said it would be delaying its 10-K filing for FY 2024. The delay comes one day after short seller Hindenburg Research alleged “fresh evidence” of accounting manipulation at the company. 

“Additional time is needed for SMCI’s management to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting as of June 30, 2024,” a filing from the company read. 

Yesterday shares plunged as much as 8% but finished the session only down 2%. Will they repeat the BTFD trend today…

In a report released on its website Tuesday morning, the short seller alleged that the semiconductor/server company, which has seen its stock skyrocket over the last few years during the AI bubble, could be engaged in accounting manipulation and self dealing among family members.

Among other points, Hindenburg wrote:

• Our 3-month investigation, which included interviews with former senior employees and industry experts as well as a review of litigation records, international corporate and customs records, found glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.

• Less than 3 months after paying a $17.5 million SEC settlement, Super Micro began re-hiring top executives that were directly involved in the accounting scandal, per litigation records and interviews with former employees.

• A former salesperson told us: “Almost all of them are back. Almost all of the people that were let go that were the cause of this malfeasance.”

• According to a lawsuit filed in April 2024, Super Micro waited only 3 months after the SEC settlement before restarting “improper revenue recognition,” “recognizing incomplete sales,” and “circumvention of internal accounting controls”.

• Even after the SEC settlement, pressure to meet quotas pushed salespeople to stuff the channel with distributors using “partial shipments” or by shipping defective products around quarter-end, per our interviews with former employees and customers.

• One former salesperson described pushing products to distributors based on made-up demand forecasts, completing a partial shipment, then later coming up with an excuse for why the rest didn’t happen. “And now you have a problem. Accounting problem maybe.”

“Beyond fresh questions around its revenue accounting, we found that Super Micro’s relationships with both disclosed and undisclosed related parties serve as fertile ground for dubious accounting,” the report says.

“For example, disclosed related party suppliers Ablecom and Compuware, controlled by Super Micro CEO Charles Liang’s brothers, have been paid $983 million in the last 3 years. Ablecom is also partly owned by Super Micro CEO Charles Liang and his wife.”

It continues: “The relationships seem oddly circular. Super Micro provides components to the entities which assemble them and sell them back to Super Micro. They also rent warehousing and factory space to Super Micro even though it has its own sprawling factory.”

“Multiple former employees and channel partners confirmed that after-sales service is undermining Super Micro’s ability to retain customers. One former salesperson said: ‘It’s their Achilles heel. It’s just horrible.’,” Hindenburg wrote.

“All told, we believe Super Micro is a serial recidivist. It benefitted as an early mover but still faces significant accounting, governance and compliance issues and offers an inferior product and service now being eroded away by more credible competition,” the report says.

You can read the full report here. 

Despite Canada having a population just 12% the size of the United States, the country was home to a majority of the fastest-growing cities between the two neighboring countries.

This map, via Visual Capitalist’s Kayla Zhu, visualizes the population change of the central cities (i.e. not including suburbs) in Canada and the U.S. that saw the greatest increases and decreases in population in 2023.

The figures come from Toronto Metropolitan University’s Centre for Urban Research & Land Development’s analysis of U.S. Census Bureau and Statistics Canada population estimates as of July 1, 2022 and July 1, 2023.

Toronto is the Fastest-Growing City in Canada and the U.S.

Below, we show the top cities in the Canada and the U.S. in terms of population growth between July 2022 and July 2023.

Eight of the top 10 fastest-growing cities were in Canada. Only two U.S. cities in Texas, Fort Worth and San Antonio, made the top 10.

Toronto saw the highest increase in population, adding over 120,000 people to the city in 2023. This growth is largely driven by the significant number of immigrants who choose to settle within the city of Toronto. In 2021, around 30% of recent immigrants to Canada lived in Toronto.

Toronto has long been a hub for immigration. In 2021, almost half (46.6%) of the population living in the Toronto metropolitan area were immigrants, according to Statistics Canada.

Cities with the Largest Population Losses

 

In terms of the highest population loss, major U.S. cities like New York, Chicago, Portland, Los Angeles, and Philadelphia, all experienced significant population decreases in 2023.

 

In 2023, over 70,000 people left New York City. While this was a decrease from their 2022 population loss of 126,000 people, it was still the highest population loss last year out of any other city in the Canada or the United States.

The trend was similar statewide: around half a million people left the state of New York in 2022, largely due to high cost of living, according to USA Today.

Not a single large central city in Canada saw a net population loss in 2023.

Lastly, it’s worth mentioning that this analysis considers central cities only (i.e. not surrounding suburbs in a metropolitan area). If looking at metro area growth, Toronto and Canadian cities still reign supreme, but cities like Orlanda, Tampa, and Atlanta also make an appearance in the bottom half of the top 10.

To learn more about the most expensive places to live in the U.S., check out this graphic on which states have the highest cost of living.

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

The level of U.S. Treasury yields and the changing shape of the Treasury yield curve provide investors with critical feedback regarding the market’s expectations for economic growth, inflation, and monetary policy. Short- and long-term yields have recently fallen, with short-term maturities leading the charge. The changes result in what bond traders call a bull steepening yield curve shift. The shift is due to weakening economic conditions, moderating inflation, and the increasing likelihood that the Fed will lower rates.

Yield curves are essential indicators that bond investors closely follow. However, many stock investors do not track yield curves despite the importance of bond yields on stock returns. Therefore, in this two-part series, we start with an introductory discussion of the four primary types of yield curve shifts and what they often entail from an economic and inflation perspective.

In Part Two, we provide a quantitative perspective on what a continued bull steepening trade may mean for returns of the major stock indices, along with various sectors and factors.

Treasury Yield Curve History

The graph below charts ten- and two-year Treasury yields and the difference between the two securities. The difference is called the 10-year/2-year yield curve. As you may have noticed, the yield curve has a recurring pattern that is well correlated with the economic cycle.

Generally, the yield curve steepens (the difference between the 10-year and 2-year yields increase) rapidly following a recession. Then, throughout most typical economic expansions, the curve flattens (the difference declines). The yield curve often inverts (the ten-year yield is less than the two-year yield) toward the end of the expansion.

One of the most accurate recession indicators occurs when an inverted yield curve steepens, returning it to positive territory. Lastly, the yield curve rises rapidly as the Fed lowers rates to boost economic activity and fight off a recession. Rinse, wash, repeat.

The Baby Bull Steepening

The recent spate of weakening labor data and broader economic activity, alongside moderating inflation, has the markets convinced the Fed will embark on a series of rate cuts starting in September. Furthermore, Jerome Powell has all but given them the green light. Per his Jackson Hole speech:

The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.

Bond yields have been falling, with the shorter-term bond yields falling the most. It’s hard to see on the graph above, but the recent bond market rally has caused the yield curve (light blue) to increase from negative 46 basis points in mid-June to negative single digits today. It is now on the verge of uninverting and consequently close to sending a recession warning.

This type of move in long and short-term bond yields is commonly referred to as a bullish steepening. The words bull or bullish relate to the fact that bond yields are falling, and subsequently, bond prices are rising. Steepening refers to the shape of the yield curve, which has increased, albeit the current yield curve is still negative.

In Part Two of this article, we will evaluate prior bull steepening cycles and quantify what it has meant for stock returns. But, to better acquaint you with yield curves, it’s worth discussing the four principal types of yield curve shifts and what they often portend.

Bull Steepening

As we just noted, a bull or bullish steepening occurs when all Treasury yields decline, but shorter maturities fall more than longer maturities. In our hypothetical example below, the two-year note falls from 3.35% to 1.50%, while ten-year notes decline from 3.80% to 2.80%. As a result, the yield curve steepens by .85%

Most often, a bull steepening trade results from traders anticipating easier monetary policy due to pronounced economic weakness and a growing likelihood of recession. Given that shorter-maturity bonds are more correlated to Fed Funds than longer-maturity bonds, it makes sense that they would fall quicker when such expectations arise.

The recent bull steepening has been textbook. The unemployment rate has risen from 3.7% to 4.3% this year, and in general, many economic indicators point to slower growth. Furthermore, inflation appears to be trending lower again, giving the Fed more comfort in lowering rates. Per Powell’s Jackson Hole speech:

My confidence has grown that inflation is on a sustainable path back to 2%.

Bear Steepening

As the name bear steepening suggests, yields for short and long-term maturities increase, with longer-term yields rising more than shorter-term yields. In the graph below, the two-year yield increases from 3.35% to 4.10%, and the ten-year yield rises from 3.80% to 5.10%. The result is an upward shift in the yield curve from .45% to 1.00%

In 2020 and 2021, the yield curve shifted this way. At the time, the Fed lowered rates to zero and did massive amounts of QE. Bond yields started to rise in anticipation of a rebound in economic activity and growing inflation concerns due to massive fiscal and monetary stimulus. Short-term yields didn’t move nearly as much as long-term yields. This occurred because the Fed pledged to keep Fed Funds very low to combat the pandemic.

In late 2023, the bear steepening reoccurred as the economy continued to run above its natural rate despite 5% Fed Funds. Higher interest rates were not impacting the economy meaningfully, and inflation stopped falling. The market thought the Fed may need to raise rates more. However, demand for money market investments was insatiable due to significant cash and money market balances, which helped keep a lid on short-term rates. At the long end of the curve, investors were forced to absorb substantial Treasury debt issuance. Accordingly, they demanded extra yield. This is referred to as an increasing term premium. 

Bull Flattener

A bull flattener trade involves short and long-term-maturity bond yields declining with longer-end yields falling more. The graph below shows two-year yields declining by 0.70% and ten-year yields declining by 1.00%. The net result is a curve flattening of .30%

Bull flattening shifts tend to be the result of relative economic optimism. The market is encouraged because inflation is likely to fall, but it is not overly concerned that lower inflation is due to waning demand. Therefore, investors are not expecting much regarding Fed rate cuts.

Conversely, the market may be concerned about the economy, but if Fed Funds are at or near zero, there is no room for the short end of the yield curve to fall. 2016 is a good example. Fed Funds were already at zero, and the economy was weakening, with inflation remaining below the Fed’s target. Longer-term bonds moved lower with inflation and economic prospects, but short-term bonds were stuck with the Fed not wanting to lower rates below zero.

The graph below, courtesy of Deutsche Bank, shows that the dollar value of negative-yielding global bonds rose sharply in 2016. Despite the international trends, U.S. yields largely remained above zero percent.

Bear Flattening

In a bear-flattening trade, yields rise across the curve, with shorter maturities rising the most. The two-year note increases from 3.35% to 4.40% in the graph below. The ten-year note rises from 3.80% to 4.20%. In the process, the curve flattens and inverts from .45% to -.20%.

Summary

With an appreciation for yield curves, it is time to focus on the yield curve shift du jour.  

What might a bullish steepening trade mean for various stock indices, sectors, and factors?

Here’s a hint. The stock market seems to love the idea of the Fed lowering rates before they do so. But, when the Fed lowers rates, the result is not often friendly for stock investors.

A new wave of Ukrainian drone attacks on Russia has damaged and set alight several more oil depots and energy facilities, one location notably which lies very deep into Russian territory.

On Wednesday drones struck the far away town of Kotelnich in Russia’s Kirov Oblast. Regional Governor Alexander Sokolov said that two inbound drones were intercepted by air defenses, while a third “fell” and a blaze subsequently erupted near the Zenit oil facility.

This clearly is one of the deepest drone strikes into Russia of the entire war, given Kotelnich lies some 1,500 km (930 miles) northeast of the border with Ukraine. It is likely a record distance.

The governor has since said the situation is “under control” and that there were no casualties as a result of the attack.

Russia’s defense ministry in a statement noted other overnight drone attacks as well, including shoot-downs of eight drones over the Voronezh Oblast and four over Rostov Oblast.

However, a depot in Rostov’s Kamensky district was apparently struck and caught fire, resulting in emergency crews seeking to extinguish it.

Another Russian oil depot in Rostov region on fire after it was targeted by Ukrainian kamikaze UAVs, this time in Kamensky district. pic.twitter.com/ydrJcKZM3f

— Clash Report (@clashreport) August 28, 2024

At least three tanks are burning at the oil depot, the Baza Telegram channel – seen as close to Russian security services – indicated. Videos showed large blazes overnight.

Already, a large fire has been raging in the city of Proletarsk in Rostov region going all the way back to August 18, which lies some 200km from the Ukrainian border.

Earlier in the war, a number of drones on a few occasions had reached near the capital of Moscow which lies some 500km from the closest Ukrainian border point. Since then these drones have been reaching deeper and deeper, and often because of their small size and low flight can evade Russian radar and anti-air systems. They are now hitting targets over 1,000km away, and this is likely with the help of NATO advisers and technology.

This morning, Ukrainian forces successfully conducted one of the deepest drone attacks of the war, striking a Russian oil depot in Kirov Oblast over 1100km from Ukraine.

Local sources report that 4 Ukrainian drones hit the depot. pic.twitter.com/d6RSUcbKCQ

— OSINTtechnical (@Osinttechnical) August 28, 2024

It has been a strategy of Ukraine’s to systematically target Russian oil facilities, seeking to disrupt the industry and put a dent in crucial funding of Moscow’s war machine. But this has only resulted in stepped-up retaliatory efforts to degrade Ukraine’s national energy grid.

US futures flat ahead of a key earnings release from Nvidia, the $3 trillion stock at the forefront of the global artificial-intelligence frenzy and the culprit for most of the market’s upside in the past two years. Viewed a barometer for AI spending across much of the technology industry, Nvidia – viewed by many as this bubble’s CSCO – is expected to project revenue growth of more than 70% for the current quarter when it reports after market close on Wednesday (full preview here). Any disappointment is certain to roil markets, given the company’s heft in US indexes. As of 8:00am S&P futures are flat, trading largely unchanged for the past week; Nasdaq 100 futs are barely in the red as NVDA erases an earlier gain in the green pre-mkt with the balance of Mag7 performing similarly and Semis are also bid. Bond yields are lower, tracking another sharp drop in oil. The USD is extending on yesterday’s gains while commodities are lower, led by Energy though Base Metals are continuing their recent bull run. The macro data focus will be on Fedspeak, bond auctions, and mortgage applications which gained 0.5% after last week’s double digit plunge (-10.1%).

In premarket trading, NVDA is flat, having rallied about 160% this year, far outpacing the Nasdaq 100’s 16.4% gain. Bank of America is down again, after Warren Buffett continued to shrink his stake, selling an additional $982 million of stock in the second-largest US bank. Nordstrom rose 8.3% after the department-store chain issued a stronger-than-expected adjusted earnings-per-share outlook. Super Micro Computer shares were set to extend Tuesday’s losses after Hindenburg Research said it’s short the maker of server equipment. Here are some other notable premarket movers:

• AeroVironment rises 9% after the defense company won a US Army contract valued at as much as $990 million.
• Ambarella soars 21% after the semiconductor-device company forecast revenue for the 3Q that beat the consensus estimate. The company is “clearly turning the corner,” Morgan Stanley said.
• Box rises 8% after the software company raised its full-year forecast.
• Foot Locker drops 6% as a 2Q same-store sales beat isn’t enough to sustain the stock’s rally of 46% since the last earnings report on May 30.
• Kohl’s rises 3% after the retailer raised its full-year forecasts for EPS and operating margin.
• nCino slides 12% after the financial-technology company’s 3Qrevenue guidance fell short of expectations.
• Nordstrom gains 3% after the department-store chain improved its comparable-sales forecast for the year and issued a stronger-than-expected adjusted earnings-per-share outlook.
• Semtech rises 4% after the semiconductor device company’s second-quarter earnings beat estimates.
• SentinelOne ticks higher by 2% after the security software company boosted its full-year revenue guidance.

The Nvidia report and earnings guidance are seen as crucial at a time when markets are grappling with the possibility of a US recession and whether the Federal Reserve can cut interest rates fast enough to engineer a soft landing. Money markets currently price about 100 basis points worth of interest rate cuts this year, starting September.

“The Nvidia result has become very much like a macro event, in some ways as big as the payrolls and CPI releases in terms of market impact,” said Justin Onuekwusi, chief investment officer at wealth manager St James Place. “There’s a lot of money, a lot of leverage in these consensus names and it will take only a slight disappointment to cause significant volatility in markets.”

European stocks are solidly in the green, rising 0.6% and at the highest since mid July, led by chemical and insurance names.  GSK shares rise as much as much as 2.8% after the drugmaker said it welcomes a decision by the Delaware Supreme Court to review a lower state court decision related to the ongoing Zantac litigation, which allows the introduction of plaintiffs’ expert evidence at trial. Here are the most notable European movers:

• Novonesis shares rose after the Danish maker of industrial enzymes increased its forecast for sales growth this year. Citi analysts called the 2Q results “solid,” though they also said further share upside might be limited.
• Ageas rises as much as 6.5%, the most since March 2022, after the Belgian life insurance firm’s first-half net operating profit beat estimates, driven by strong inflows. KBC highlights the “hoped for” share buyback, which will start next month.
• Maire shares gained as much as 8.5% in Milan, the biggest increase since March 5, after Jefferies initiated coverage of the Italian technology and engineering company with a buy recommendation.
• Kingfisher shares fall as much as 2.7% after Citi downgraded the retailer to neutral, ending a buy recommendation that has stood since February.
• Stadler Rail’s share price drops as much as 6.5% after the Swiss train manufacturer reported disappointing results with a miss on revenues, Ebit and free cash flow.

Earlier in the session, Asian stocks rose as technology shares gained ahead of Nvidia’s earnings due later Wednesday, which could shine a light on the momentum of the rally. The MSCI Asia Pacific Index advanced as much as 0.2%, with TSMC and Toyota Motor among the biggest contributors. Shares in Japan and Taiwan edged higher, while China and Hong Kong benchmarks fell following a slew of disappointing corporate earnings. Nvidia’s earnings will offer clues on whether the artificial-intelligence frenzy has more room to run. Expectations of interest rate cuts by the Federal Reserve have also benefited rate-sensitive tech names, with traders now turning their attention to next week’s non-farm payrolls figures.

In FX, the dollar rose about 0.2% rising versus all its G-10 rivals except the Aussie which is flat after CPI topped estimates; the greenback is still on track for its steepest monthly decline this year, undermined by rate-cut bets. Most other currencies lost ground, with the euro dropping 0.5%. The Norwegian krone was the weakest, falling 0.5% against the greenback.

In rates, Treasuries are marginally richer across the curve with 10-year futures above Tuesday’s high in muted price action. US 10-year around 3.81% is around 1bp lower on the day with bunds and gilts in the sector outperforming by 4bp and 2bp; Treasury curve spreads are little changed. European rates outperform Treasuries, supported by gains in German long-end rates. German bond gains are long-end-led, with 30-year yields lower by ~5bp and 5s30s, 2s10s spreads flatter by 1.5bp and 2bp on the day. US session includes $70 billion 5-year note auction, following good demand for Tuesday’s 2-year note sale.

In commodity markets, gold retreated $15 to around $2,509/oz, after a three-day advance that took it closer to its all-time high, while Brent crude futures shed 1%, adding to the previous day’s slide; WTI fell 0.9% to trade near $74.80.

Bitcoin fell below the $60,000 level as part of a broad crypto market retreat that included a sharp drop in second-largest token Ether.

The US economic data calendar empty for the session; Fed speakers scheduled include Bostic at 6pm

Market Snapshot

• S&P 500 futures little changed at 5,647.50
• STOXX Europe 600 up 0.3% to 520.45
• MXAP up 0.2% to 186.19
• MXAPJ little changed at 576.03
• Nikkei up 0.2% to 38,371.76
• Topix up 0.4% to 2,692.12
• Hang Seng Index down 1.0% to 17,692.45
• Shanghai Composite down 0.4% to 2,837.43
• Sensex up 0.4% to 82,000.78
• Australia S&P/ASX 200 little changed at 8,071.40
• Kospi little changed at 2,689.83
• German 10Y yield down 2.7 bps at 2.26%
• Euro down 0.3% to $1.1149
• Brent Futures down 0.9% to $78.81/bbl
• Gold spot down 0.7% to $2,507.21
• US Dollar Index up 0.28% to 100.84

Top Overnight News

• Australia’s Jul CPI comes in at +3.5%, down from +3.8% in June but a bit firmer than the consensus forecast of +3.4%. WSJ
• Bank of Japan Deputy Gov. Ryozo Himino has backed the case for further interest-rate hikes if the economy and prices grow as expected, echoing recent comments from the central bank’s chief. WSJ
• Protests in China are on the rise as the effects of a slowing economy rattle citizens and Beijing refrains from taking bolder steps to shore up growth. Cases of dissent increased 18% in the second quarter compared to the same period last year in figures documented by the China Dissent Monitor at Freedom House, a US advocacy group. The majority of events linked to economic issues. BBG
• China’s plans to issue billions of dollars of government bonds before the end of the year could lead to a correction in the price of the country’s treasuries, people close to the central bank have warned, bursting what some have called a bubble in the market. FT
• Middle East tensions continue to cool as Hezbollah and Iran signal they want to avoid a larger war from commencing. NYT
• Warren Buffett sold an additional $982 million of Bank of America Corp. stock as his conglomerate continues to shrink its investment in the second-largest US bank. His Berkshire Hathaway Inc. has trimmed the stake by a total of almost 13% in a series of sales since mid-July, generating $5.4 billion in proceeds. Berkshire disclosed the latest disposals in a regulatory filing late Tuesday, detailing sales on Aug 23, 26 and 27. BBG
• US Democratic Presidential Candidate Harris and her VP candidate Waltz will be interviewed on CNN this week Thursday: Reuters.
• Apple cuts about 100 services jobs as part of priority shift: Bloomberg.
• CAICT shipments of phones within China +30.5% Y/Y at 24.2mln handsets in July. Shipments of foreign branded phones, including Apple (AAPL) iPhones within China, +2.7% Y/Y in July: Reuters
• Israel launched a major counterterrorism operation involving hundreds of troops in multiple West Bank cities. WaPo
• Russia cares more about capturing Pokrovsk in Ukraine’s Donbas region than in repelling the Ukraine cross-border strike in the Kursk region. NYT
• Investors are pouring cash into US government bond exchange traded funds as bond fever spreads through the market ahead of the Federal Reserve’s expected interest rate cut in September. BlackRock’s TLT, the biggest ETF tracking long-dated Treasury bonds, pulled in nearly $4bn between the start of August and this Monday, according to data from Morningstar. The fund has had bigger inflows in only three months since it launched in 2002. FT

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded subdued but mostly within tight ranges following a mixed lead on Wall Street, whilst volume in APAC remained low amid thin summer trade. ASX 200 was pressured by Telecoms and Energy, whilst the hotter-than-expected Aussie CPI sent the index lower, albeit briefly. Nikkei 225 was hindered by the recent upside in the JPY, although price action was contained to tight ranges. Losses lead by Banks and Miners. No notable reaction was seen to BoJ Deputy Governor Himino who noted financial and capital markets remain unstable and the BoJ needs to monitor their developments with the utmost vigilance. Hang Seng and Shanghai Comp initially traded in tight ranges but the Hang Seng later extended on losses with Hong Kong seeing its earnings pick up in pace – Meituan and BYD traded lower ahead of earnings.

Top Asian news

• BoJ Deputy Governor Himino said financial and capital markets remain unstable, and BoJ needs to monitor their developments with the utmost vigilance. He added the BoJ will adjust the degree of monetary accommodation if it has growing confidence that its outlook for economic activity and prices will be realized, and the central bank needs to closely monitor developments in recent market volatilities including weaker stocks and stronger JPY.
• Alibaba (BABA/ 9988 HK) converted its secondary listing on the Hong Kong Exchange into a primary listing; says the Co. is now a dual primary listed firm on the NYSE and HKEX.
• PBoC injected CNY 277.3bln via 7-day Reverse Repo at a maintained rate of 1.70%

European bourses, Stoxx 600 (+0.3%) began the session on a modestly firmer footing. As the morning progressed, some slight divergence was seen in the markets; the DAX 40 (+0.3%) edged to session highs, whilst the FTSE 100 (-0.1%) tilted lower. European sectors hold a strong positive tilt; Insurance takes the top spot, propped by post-earning gains in Prudential (+2.7%). Basic Resources is found at the foot of the pile, hampered by broader weakness in underlying metals prices. US Equity Futures (ES U/C, NQ +0.2%, RTY U/C) are flat/modestly firmer, with slight outperformance in the NQ ahead of NVIDIA (+0.2%) earnings after-hours. The data docket for the remainder of the day is void of any key data releases, but Fed’s Bostic may help to spur some action.

Top European news

• Political Deadlock Revives French Stock Risks After Olympic Calm
• Morgan Stanley’s Ex-Germany Head Named as CEO of Flatexdegiro

Geopolitics: Middle East

• Israeli, US, Egyptian and Qatari negotiators were meeting in Doha on Wednesday for “technical/working level” Gaza ceasefire talks, via Reuters citing sources.
• The Israeli army launched a large-scale operation against militants in various parts of the northern West Bank, according to Al Jazeera citing Israel Channel 14.
• “Hundreds of Israeli soldiers take part in the operation in the northern West Bank with full air cover”, according to Sky News Arabia.
• Israeli operation in the West Bank is expected to last for days, according to Israel Channel 14. Sky News Arabia suggested “Israeli operation in Tulkarm and Jenin [in West Bank] is expected to last for a long time, up to weeks”, according to Sky News Arabia.
• “Israel’s Channel 14: The army mobilized thousands of soldiers from special units in preparation for the large-scale operation in the northern West Bank”, according to Al Jazeera.
• “Israeli army storms Aida camp in the southern West Bank”, according to Al Arabiya.
• An Israeli delegation from the Mossad, the IDF and the Shin Bet will travel to Doha on Wednesday to continue talks with US, Qatari and Egyptian officials to close the remaining gaps in the Gaza hostage and ceasefire deal, via Axios’ Ravid.

Geopolitics: Ukraine

• Several oil tanks reportedly on fire at Glubokinskaya oil depot after Ukraine’s drone attack in Russia’s Rostov region, according to Reuters citing Telegram reports.

US Event Calendar

• 07:00: Aug. MBA Mortgage Applications +0.5%, prior -10.1%

DB’s Jim Reid concludes the overnight wrap

Markets put in a subdued performance yesterday, with little in the way of major drivers pushing financial assets in either direction. To be fair, that should soon change from today, as we’ve got Nvidia’s earnings coming out after the US close tonight, which have become an important macro event in their own right over recent quarters, with reactions that rival the sort of moves taking place after surprise jobs reports or CPI releases. The days ahead will also bring some other pivotal data releases, including the PCE inflation print on Friday, followed by the US jobs report next week. But in the meantime, risk assets were pretty steady, with the S&P 500 (+0.16%) posting a modest increase that kept it within 1% of its all-time high from mid-July.

Of course, much of the focus right now is on the Fed and how much they’ll cut rates in September. But even there, the data we had yesterday was inconclusive, and meant that markets continued to struggle for direction. For example, we got some good news from the Conference Board’s consumer confidence indicator, as the confidence reading rose to a 6-month high of 103.3 (vs. 100.7 expected). So that helped to push back on the narrative that the economy was deteriorating into a sharper downturn. But on the other hand, the labour market indicators fell to their weakest levels so far in this cycle, which supported concerns about the recent slowdown in the labour market. Specifically, the difference between those saying jobs were plentiful, and those saying they were hard to get, fell to just 16.4%, which is the smallest that gap has been since March 2021.

With that data in hand, investors maintained their view that there was a moderate chance of a 50bp rate cut at the upcoming meetings. For instance, futures are now pointing to a 33% probability of a 50bp move in September, up from 28% the previous day. But that’s still a long way from where pricing had been at the height of the market turmoil at the start of the month, when a 50bp move was even fully priced at one point intraday. Investors didn’t have any Fed speakers to go off either yesterday, although Atlanta Fed’s Bostic is scheduled to speak on the economic outlook tonight.

With the total amount of Fed cuts priced by December’s meeting ticking up +3.3bps to 104bps, front-end Treasuries rallied yesterday, and the 2yr yield came down -3.6bps to 3.90%. That rally was helped by a solid 2yr auction that saw $69bn of bonds issued 0.6bps below the pre-sale yield. However, there was a marginal selloff at the long end, and the 10yr yield rose +0.6bps on the day to 3.82%. That said, the 10yr real yield (-0.3bps) extended its recent decline, closing at its lowest level since January at 1.67%.
Over in Europe, there was a more pronounced bond selloff, which saw yields on 10yr bunds (+4.3bps), OATs (+5.9bps), BTPs (+7.4bps) and gilts (+5.8bps) all post a decent rise. With yields rising more in Europe than the US, the broad dollar index (-0.30%) fell to a new one-year low, whilst sterling closed at its strongest level against the dollar since March 2022 at $1.3261.

The European rates selloff in part followed a few comments from ECB officials, including Dutch central bank governor Knot, who said that “I will have to wait until I have the full data and information going into that meeting to decide my position on whether September is appropriate”. Overnight, our European economists published a new piece in which they discuss the factors that will determine how quickly the ECB will cut rates in the coming months (link here). This follows another note yesterday in which they assessed the hawkish and dovish perspectives on the current ECB outlook (link here).

For equities, all attention is now on Nvidia’s earnings release tonight, which has helped to drive significant market moves recent quarters. For instance, their results in February saw the S&P 500 surge by +2.11% the next day, marking its second-best daily performance of 2024 so far. Bear in mind that Nvidia’s share price is already up +159% on a YTD basis, making it the top performer in the entire S&P 500, and it has risen by more than +1000% since its low in October 2022.

Ahead of that release, the main US indices saw little change, with the S&P 500 (+0.16%) and the NASDAQ (+0.16%) both posting modest gains. Nvidia (+1.46%) rose ahead of its results, which pulled the Philadelphia Semiconductor Index higher (+1.10%), but the Mag 7 saw a modest decline overall (-0.30%) given losses from Tesla (-1.88%) and Amazon (-1.36%). Small-cap stocks also struggled, with the Russell 2000 down -0.67%. Over in Europe though, the STOXX 600 (+0.16%) and the DAX (+0.35%) both closed at a one-month high.

Overnight in Asia, there’s been a worse performance for equities, with several major indices losing ground. That includes the Hang Seng (-0.97%), which is currently on track for its worst performance in over three weeks, back when the market turmoil was at its most severe at the start of the month. Other indices have also lost ground, including the CSI 300 (-0.61%), the Shanghai Comp (-0.22%), the KOSPI (-0.29%) and the Nikkei (-0.03%). US equity futures have also remained subdued, with those on the S&P 500 unchanged this morning.

In the meantime, we also got Australia’s latest CPI data for July overnight. That showed CPI falling to +3.5% (vs. +3.4% expected), and the trimmed mean also eased back to +3.8%. Given the data was a bit stronger than expected, markets dialled back their expectations for rate cuts slightly, and Australian government bond yields have risen overnight, with the 10yr yield up +3.0bps to 3.94%.

There wasn’t much other data yesterday, although the Richmond Fed’s manufacturing index for August fell to -19 (vs. -14 expected), which is its lowest level since May 2020. Alongside that, the FHFA’s house price index for June fell by -0.1% (vs. +0.1% expected).

To the day ahead now, and earnings releases include Nvidia after the US close. From central banks, we’ll hear from the Fed’s Bostic, along with the BoE’s Mann. And data releases include the Euro Area M3 money supply for July, along with French consumer confidence for August.

Warren Buffett’s ongoing liquidation of his Bank of America stake comes right before the Federal Reserve’s expected start of the interest rate-cutting cycle in mid-September. Additionally, Buffett has halved his Apple holdings and amassed a record amount of cash. At 93, it seems the billionaire investor is bracing for a rough patch in the US economy. 

Buffett’s Berkshire Hathaway has been on a six-week selling spree of Bank of America shares, trimming its entire position by nearly 13% and generating upwards of $5.4 billion in proceeds, according to Bloomberg. Berkshire’s latest filing shows that since last Monday, another $982 million worth of shares were sold. 

Bloomberg data shows Berkshire has dumped more than 129 million BofA shares in the last six weeks. 

Berkshire remains the bank’s largest stockholder, with 903.8 million shares, worth about $36 billion, as of Tuesday’s closing price. However, the position’s size has fallen to early 2019 levels. 

Berkshire’s selling was abrupt and without reason. The wave of selling began in mid-July around and above the $40 handle. 

In addition to the BofA selling, Berkshire dumped half its Apple shares and other securities, sending its cash pile soaring by a record $88 billion to an all-time high of $277 billion at the end of the second quarter. 

As shown in the chart below, in the second quarter (which ended June 30, and thus just two weeks after the Apple’s Developer Conference which took place on June 10 and which was – at least on the day of – a total bust), Berkshire sold a net $75.5 billion worth of stock, the bulk of which we now know, came from Buffett’s liquidation of half his Apple shares.

It’s hardly a surprise why Buffett has been dumping equities and raising record amounts of cash – as we noted in “Berkshire’s Growing Cash Pile Has A Hidden Message On Stocks,” the Buffett Indicator has rarely signaled a more expensive market.

Back to BofA, maybe Buffett’s reason for selling BofA is correctly pointed out by WSJ: “If the Fed were to make three quarter-point cuts before the end of the year, the bank expects its quarterly net interest income would be lower by roughly $225 million in the fourth quarter from the second quarter.” 

Authored by James Rickards via DailyReckoning.com,

Remember the Aug. 5 mini-crash? Well, investors apparently don’t. It seems like a distant memory at this point, as the “buy the dip” theme is a deeply entrenched force in today’s market.

Well, I’m afraid that this Wednesday, Aug. 28, they’re about to get a stark reminder. Only this time, it’ll be far worse. Today, I’ll show you why.

First off, why are stocks going up? The simple answer is that the market’s in a bubble. There are a couple of things to consider…

The S&P 500 is really the S&P Four, meaning it’s a cap-weighted index. That means that the impact of a stock’s price on the index is a function of its market capitalization. The bigger its market cap, the greater its impact on the index.

Right now, the top 10 stocks in the S&P account for about 30% of the index.

And it’s just a small handful of stocks like Apple, Microsoft, Nvidia, Google (Alphabet) and a couple of others that account for most of the market’s gains this year.

If you actually take the 500 stocks in the S&P 500 (503 to be precise), more of them are down this year than are up. So when you say the S&P is up 18% on the year, it presents a very distorted picture.

The Nvidia Bubble

Nvidia has been the market’s leading performer, partly because of the latest market fad concerning artificial intelligence (AI) and GPT (generative pre-trained transformers).

The AI boom has created hand-over-fist demand for Nvidia’s chips.

But do the people buying these stocks actually know what GPT is? No, most don’t. But they don’t want to miss the Nvidia gravy train.

People buy into the hype because they don’t want to miss out on the next big thing. And so they buy the stock. That drives the stock higher, which attracts more buyers, which drives the price even higher, which attracts even more buyers.

t’s a positive feedback loop. We’re now in that feedback loop. It’s amplified by institutional investors. Large index funds like Vanguard, State Street, Fidelity and some others have loaded up on Nvidia stock.

What happens when they buy Nvidia? The stock price goes up. Then what happens? They buy more Nvidia stock because it has an even larger place in the index.

So it’s a process that feeds on itself. And it can go on for a long time. That’s how bubbles form.

How All Bubbles End

How does it end? Well, it ends with a crash eventually. The music can’t keep playing forever. The question then becomes when exactly is the music going to stop playing?

It can be a difficult question to answer. You know it’s a bubble, even if you don’t know when it’ll pop. You know it will, but you usually don’t know the specific catalyst that will set the crash in motion. Often, the catalyst is only obvious in retrospect.

The first factor to consider about Nvidia is that its valuation is absolutely sky-high. It has a P/E ratio of 75, which means investors are willing to pay $75 for each dollar of earnings.

But here’s something most investors don’t know: Nvidia’s CEO Jensen Huang and its CFO have been selling hundreds of millions of dollars worth of Nvidia shares. In fact, they just hit a record of shares sold.

Now, I’ve been general counsel for some very large companies. Insider selling like this isn’t a sign of any problem by itself. A lot of times, the way executive compensation is structured means they end up selling shares on a set schedule.

But when I looked into it, I noticed some other strange coincidences that made me dig in more. And I believe there’s a good reason these insiders are selling their shares. And I found five major reasons why I believe Nvidia stock is about to get hammered in two days.

Peak Nvidia?

Yes, Nvidia chips have been in high demand, which has helped fuel the Nvidia boom. But I’ve uncovered a lot of evidence that demand for Nvidia chips has peaked.

Not only has demand peaked, but I believe it’s actually shifting to other chipmakers. Increasingly, these AI chips are being designed in house at companies like Google and Amazon through partnerships with other companies. This lets them train AI models more cheaply.

Another issue with Nvidia chips is that they’re often too powerful for the different AI uses that these companies need.

It’s like using a cannon when you only need a rifle. It’s simply overkill.

Meanwhile, Nivida’s chips are very expensive, and they require a lot of energy which also costs a lot. So by shifting to building their own in-house chips, these big tech companies are reducing their costs, and becoming independent of Nvidia.

But Nvidia stock is basically “priced for perfection.” The problem is when people expect perfection, anything less than perfect is bad news. And I believe Nvidia investors are about to get some really bad news two days from now.

What’s the big deal? Well, it could trigger a massive market chain reaction, potentially leading to losses of 30%, 50% and even 80% among some of the biggest tech stocks that have been driving the market.

If it happens, the major stock market indexes are going to get clobbered. It won’t be the end of the world, I want to be clear about that. But the market could take a long time to recover.

Which Snowflake Will Trigger the Avalanche?

I’ve often compared the causes of market crashes to snowflakes that can trigger an avalanche. A massive amount of snow can accumulate before that one final snowflake comes along to start the chain reaction.

The way to think about it is that the triggering snowflake might not look much different from the harmless snowflake that preceded it. It’s just that it hit the system at the wrong time, at the wrong place.

There’s a lot of snow built up on this mountain. Nvidia could potentially be the snowflake that triggers an avalanche.

I’m not telling you to panic, but I do want you to be prepared for a possible avalanche. If it doesn’t happen, that’s great, you can get on the ski lift and take another run down the mountain.

But if an avalanche does occur, you’ll sure be glad you avoided it.