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Big Techs AI Bubble Will Be Bigger then Dot-Com Wipe out!

BofA says AI is in a ‘baby bubble’ that echoes the dot-com era, and one move could easily blow up

 

  • What could burst the bubble is the Fed pausing rate hikes and then restarting the cycle.
  • BofA said the dot-com blow-up in the early 2000s had roots in the Fed restarting policy tightening in 1999.

The Fed is NOT on the way to pausing its run of rate hikes at its June 14 gathering. This month, it bumped up its benchmark rate for the 10th consecutive time to beat down inflationary pressures.   But a pause would be a policy error, and the Fed attempting to fix it by restarting rate hikes could burst the AI bubble, Hartnett said, recalling similar conditions in the dot-com era.  The Fed mistakenly pausing in 2023 would be communicated to investors by US bond yields rising above 4%. “[And] if so we most certainly ain’t seen the last Fed rate hike of the cycle,” Hartnett said in BofA’s Flow Show note.

BofA’s investment strategy team recalled the frenzy surrounding internet stocks in 1999 that drove the Nasdaq Composite up to new highs at 5,000. The speculative surge in internet stocks alongside a bubbling US economy forced the Fed under Alan Greenspan to restart monetary tightening, it said. The dot-com bubble popped nine months later. NN: Here  we go again. Desperate times brings desperate events. To be clear here this AI feeding frenzy is a great gift of GOD for us. We need a really big pay day. You might remember how wee we did in the last tech wreck. This time we have some great tools. With the incredible leverage of CFD’S and the fact this is a FANG rally. One of the narrowest I have ever seen. I am doing a deep dive this Memorial day weekend and will have trades for every level trader. Holy shit how lucky we are.

 

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US to keep interest rates high through 2024 – IMF…….. Fed’s Mester: PCE inflation shows slow progress

The International Monetary Fund issued on Friday its preliminary findings on the state of the United States economy following its official visit to the country, predicting annual GDP growth of 1.7% in 2023, followed by 1% next year. This slowing will likely be followed by an increase in unemployment to about 4.5% by the end of 2024. Turning to inflation, the IMF noted consumer prices will continue to decrease while warning inflation is expected to remain above the Federal Reserve’s 2% target range over the next two years.

“To bring inflation firmly back to target will require an extended period of tight monetary policy, with the federal funds rate remaining at 5.25–5.5% until late in 2024,” the IMF noted in a report published on its website.

Furthermore, the IMF also showed a scenario where the US economy would slow more abruptly, likely next year, creating a recession prompted by tighter monetary policy. In this case, the combination of high interest rates, a strong dollar, and a sharper slowdown in business activity would have significant negative macro-financial spillovers worldwide, the IMF warned.

Fed’s Mester: PCE inflation shows slow progress

Cleveland Federal Reserve Bank President Loretta Mester told CNBC on Friday that the latest figures on consumer expenditure in the United States show “slow progress” in policymakers’ efforts to curb inflation. “It’s concerning,” Mester stressed, pointing out that the Federal Reserve could lean towards more tightening in the coming period. “My path for the funds rate is not that we raise to some peak rate and then immediately start cutting,” she argued, but to leave elevated rates in the restrictive territory “for a time” in order to be absolutely certain that inflation is on a “sustainable” path to return to 2%. NN: the wall Street artificial intelligence spin machine is working overtime. They are desperate. Fear has no bounds. Its like a swat team blowing open the door on your crack house. There is no imminent artificial intelligence revolution. Their is not Fed tapering and they sure as hell will not be LOWERING rates any tine soon. I’ll tell you what is about to happen. The FED continues to raise rates until it throws he US economy into a recession some will call a depression. Oil will soar to the moon as oil supplies due to lack of investment and production cuts fail to  keep up with demand. And we will SOON have a Artificial Intelligence Bubble Bust. Making the Dot Com market wipe out look like a food fight in the kindergarten. Are you ready to make a shit pot full of money?

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PCE price index and core gauge both topped estimates in April

US inflation and consumer spending accelerated last month, highlighting steady price pressures and demand that will keep Federal Reserve policy makers tilted toward raising interest rates further. The personal consumption expenditures price index and a core measure that excludes food and energy, the Fed’s preferred inflation gauges, both exceeded projections. The Commerce Department’s data also surprised with the strongest gain in household spending since the start of the year. Combined with other Friday reports showing a surge in business equipment orders and a pickup in merchandise imports, the data indicate demand continues to power ahead.

Inflation Accelerated in April | US real personal spending also picked up, strongest since January

Consumer spending, adjusted for prices, increased 0.5%, the strongest advance since the start of the year as outlays for goods and services picked up. While the pace of inflation has moderated since peaking a year ago, resilient household demand and steady business investment risk keeping price pressures elevated. That’s the challenge facing Fed officials as they debate whether to pause their rate-hike campaign and assess implications of tighter policy on the banking system and economy more broadly. Following the reports, traders increased bets on a Fed rate hike in June and now see such a move as more likely than a pause. Treasury yields jumped after the report.

Price metric Actual Median est.
PCE (MoM) +0.4% +0.3%
PCE (YoY) +4.4% +4.3%
Core PCE (MoM) +0.4% +0.3%
Core PCE (YoY) +4.7% +4.6%

Price pressures are showing few signs of abating quickly, and a strong jobs market continues to give Americans the financial wherewithal to keep spending. Any persistence of inflation in the service sector, in part due to strong wage growth in those industries, risks keeping price growth above the Fed’s 2% target for the foreseeable future.

A so-called supercore inflation measure closely monitored by the Fed — the cost of services excluding housing and energy — increased 0.4% in April, the biggest month-over-month advance since the start of the year, according to Bloomberg calculations. Fed Chair Jerome Powell has emphasized the importance of looking at such a figure to gauge the outlook for inflation. On a year-over-year basis, the metric rose 4.6%. On the spending side, the report suggests the economy got off to a solid start in the second quarter. On an inflation-adjusted basis, outlays for goods rose 0.8%, the most since January and reflecting stronger purchases of autos and pharmaceuticals. Outlays for services increased 0.3%, also the biggest gain in three months and led by financial services and insurance as well as health care. At the same time, inflation-adjusted disposable income, the main support to consumer spending, was unchanged after 0.2% increases in the prior two months. The April figure was the weakest since mid-2022. The saving rate fell to 4.1%.

What Bloomberg Economics Says…

“Downward revisions to personal-income data, viewed in combination with still-strong spending data, show household balance sheets deteriorating faster than previously thought. Paired with an inflation reading that came in higher than anticipated, the April PCE data will do little to reassure the Fed ahead of the June 13-14 FOMC meeting.”

— Jonathan Church, Stuart Paul and Eliza Winger, economists

Wages and salaries, unadjusted for prices, increased 0.5%. Nominal incomes rose 0.4%, an acceleration from the prior month. Separate data showed nondefense capital goods orders — a proxy of demand for business equipment — jumped 1.4%, the biggest advance since December 2021. Total bookings for durable goods rose 1.1%. In another sign of robust domestic demand, the US merchandise-trade deficit grew in April to $96.8 billion, the widest since October and above all estimates. Imports increased 1.8%, while exports dropped. The data aren’t adjusted for inflation. NN: This guarantees that not only will the Fed  NOT lower rates but they will raise them at every meeting they will have this year. Its guaranteed the FED will slam this economy to the mat. SO far they have failed to get inflation under controls. And the mindless AI hysteria will be another Dot Com bust…. Much bigger then the last one.

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Stock Market Monday Memorial Day…. SELL OFF!

(Bloomberg) — Markets are largely in the green Friday but strategists warn there’s still a prospect US debt-ceiling negotiations break down over the weekend or result in draconian spending cuts that crimp global economic growth. Assets in Asia are especially vulnerable as they will be the first to react to any agreement when they open Monday as the US will be shut that day for a holiday. Republican and White House negotiators are making progress toward a deal to raise the debt limit but details remain tentative and they are yet to agree on the size of a cap for federal spending, according to people familiar with the talks. Spending cuts required to get the Republican side to agree on a deal could cost as many as 570,000 jobs, a Bloomberg Economics model shows.

“The outcome of any resolution will probably amount to a fiscal contraction that’s not entirely priced in by the market,” said Aninda Mitra, head of Asia macro and investment strategy at BNY Mellon Investment Management in Singapore. “When you’re trying to rebuild cash balances like crazy, that build-up sucks out liquidity at a time when the markets have kind of whistled past the graveyard a little bit.”

Fitch Ratings said it may cut its AAA rating for the world’s biggest economy to reflect the increased partisanship that’s preventing a deal. Regional equities ticked higher Friday, but that was driven more by a rebound in technology shares than optimism over a potential agreement. There’s no certainty any debt deal will be the end of the issue, especially as bond markets are potentially underpricing the risks related to the final agreement, according to Owen Gallimore, head of Asia-Pacific credit analysis at Deutsche Bank AG in Singapore.

“The resolution can quickly turn into a selloff,” he said. “Bearish calls this year of credit-market woe have not played out yet, and the market in Asia is trading tight spreads into this situation, so the risk-reward isn’t good.” NN:  I am very uneasy with this stock market rally. I know the world is enamered with the latest Artifical hype. I just don’t see where the profits are. And it strikes me as deperation. Especially when you consider the FED has got the markets in their crosshaires……. Where is the money ball?

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Oil Short-Sellers Might Be In For Another Big Squeeze

https://youtu.be/5masmTyuJpA

 

  • According to commodity experts at Standard Chartered, speculative positioning in crude oil has now returned to its March bearish extreme.
  • It’s becoming increasingly clear that Saudi Arabia is no longer interested in staying in Washington’s good books, and the OPEC+ cartel will do anything in its power to keep oil prices high.
  • U.S. shale output growth is leveling off, and demand for drilling equipment is already falling in several areas of the U.S. shale patch

Oil prices recorded big declines on Thursday, with WTI and Brent crude down 3% on the intraday session as debt ceiling jitters overcame optimism about another round of OPEC+ production cuts.  Rampant short-selling has also been putting a lot of pressure on the markets. According to commodity experts at Standard Chartered, speculative positioning in crude oil has now returned to its March bearish extreme despite the OPEC+ cuts taking effect in the current month.

There’s a disconnect between what energy economists are seeing in the data and what speculative traders are acting on.

Oil prices have touched multi-year lows on several occasions over the past two months, with StanChart speculating that the disconnect could be the result of the increasingly top-down and macro-led nature of oil-market sentiment. But the shorts might be in for another big short squeeze. It’s becoming increasingly clear that Saudi Arabia is no longer interested in staying in Washington’s good books, and the OPEC+ cartel will do anything in its power to keep oil prices high.

“Speculators, like in any market they are there to stay, I keep advising them that they will be ouching, they did ouch in April, I don’t have to show my cards I’m not a poker player… but I would just tell them watch out,” Saudi Energy Minister Abdulaziz bin Salman

The United States and Europe have been strongly opposed to production cuts by the cartel, with President Joe Biden’s administration accusing Saudi Arabia of colluding with Russia and supporting its war in Ukraine shortly after OPEC+ announced the first cuts.

“The Saudi Foreign Ministry can try to spin or deflect, but the facts are simple, this will increase Russian revenues and blunt the effectiveness of sanctions,” National Security Council spokesman John Kirby said in a strongly worded statement in October.

The Biden administration has also been frustrated by the inability or unwillingness by domestic producers to ramp up production in a bid to lower fuel prices. U.S. shale producers have opted to return excess cash to shareholders instead of drilling more. The much-touted second shale boom has lately been getting a reality check as equipment demand declines sharply, a worrying sign that drilling in U.S. shale energy regions is leveling off.  The Financial Times has reported that next week, Texas auctioneer Kruse Asset Management will auction off two unused, top-of-the-line drilling rigs valued at $40 million and $30 million when built in 2019 at  starting bids of just $12.9M and $2.3M, respectively.

“There’s no reason for them to be so cheap, but there’s just no demand,” Dan Kruse, chief executive of Kruse Asset Management, has told the Financial Times.

According to Baker Hughes data, U.S. oil and natural gas rig count has declined 6% in the year-to-date to 731 last week, reversing a steady climb since the depths of the pandemic. The current tally is a far cry from the nearly 2,000 rigs that were running around mid-2014 at the peak of the shale boom. Last week, rig count for gas-directed rigs dropped by 16, or 10 per cent–the steepest weekly fall since 2016. Expectations for another shale boom are getting tamped down due to rising costs as well as limited supplies of labor and equipment that continue to hamstring efforts by U.S. shale producers to quickly ramp up production. Still, a number of experts have predicted that U.S. production will continue growing. A week ago, the Energy Information Administration (EIA) forecast U.S. crude production will rise about 5% in 2023, while fuel demand will increase 1%. U.S. crude oil exports for the month of April surpassed forecasts, hitting a record 4.5 million barrels per day in March thanks to a strong Chinese market due to rising fuel demand. U.S. crude exports grew 22% last year from 2021 after Russia’s invasion of Ukraine led the U.S., the EU and Canada to ban imports of Russian oil and dramatically altered global flows.

China is the world’s second largest oil consumer, and has recorded an economic resurgence ever since it rolled back its strict zero-covid policies. April exports to China surged to ~850,000 barrels per day, the highest level since May 2020.

Overall, the oil price selloff is likely to prove fleeting, with most experts predicting oil prices above $80 a barrel over the coming years–well above the $58-a-barrel average price between 2015 and 2021. NN: They will fuck them again. I remember $1.00 oil and 25 cents gasoline. Then OPEC came. I remember $10 oil and then $30 and soon we will remember the gold old days of $80 oil. As long as demand keeps on growing and their is no viable alternative (ask Germany) OPEC rules the energy markets.

 

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Nvidia makes jaws drop on Wall Street as stock explodes higher.

Analysts were awestruck in describing Nvidia’s latest outlook, with one musing that it could have marked the ‘greatest beat of all time’

Unprecedented. Cosmological. Unfathomable.

Those are just some of the ways that awestruck analysts described Nvidia Corp.’s NVDA, 27.47% latest bout of quarterly guidance. The chip maker said it expects $11 billion in revenue for the current quarter, an outlook that far surpasses the prior $7.2 billion consensus view and that would blow out of the water Nvidia’s previous quarterly revenue record of $8.3 billion. “In the 15+ years we have been doing this job we have never seen a guide like the one NVDA just put up with FQ2 outlook that was by all accounts cosmological, and which annihilated expectations,” Bernstein analyst Stacy Rasgon wrote in a note to clients following Wednesday’s report. Nvidia shares have enjoyed a massive recent run — rising 109% over the course of 2023 as of Wednesday’s close — on the heels of optimism about the company’s ability to capitalize on the artificial-intelligence boom. Nvidia’s management showed it expects the AI hype to translate to serious revenue, and quickly. “Tactically the only question that really matters is whether the new datacenter trajectory represents a new normal run-rate or a surge on the back of generative AI hype,” Rasgon continued. “However, at least in the near to medium it does appear to be sustaining (at least through the year) and we would note that a one-year cycle around a new architecture would actually be an anomaly.” Nvidia’s stock is ahead another 25% in Thursday morning trading, putting a $1 trillion valuation in sight. The stock is not only the best performer in the S&P 500 SPX, 0.43% Thursday, according to Dow Jones Market Data, but also the index’s biggest gainer so far — this week, this month, this quarter since this time last year. Rasgon noted that Wall Street has been looking for cheaper AI plays than Nvidia shares in light of this year’s strong rally, but maybe they shouldn’t look any further. “Perhaps NVDA itself is the best way to accomplish that (while still undeniably pricey it is clearly not quite as expensive as it looked) and the narrative, backed up by actual products and sales, still has legs in our opinion,” he wrote, while keeping his outperform rating and boosting his target price to $475 from $300. Raymond James analyst Srini Pajjuri also heaped on effusive praise as he called Nvidia’s outlook “unprecedented.” “To say that NVDA’s outlook exceeded even the most bullish expectations is an understatement, in our view,” Pajjuri wrote.

Nvidia CFO on record-breaking forecast: ‘The inflection point of AI is here’

The question now is whether Nvidia’s momentum is sustainable, but he said that “management appears to have solid 2H visibility in data center, and is procuring substantially larger supply for the next few quarters.” The generative-AI rush also seems to fueling strong demand for Nvidia’s full stack, in his view. Pajjuri had a strong buy rating on the shares and lifted his price target to $450 from $290. Susquehanna Financial Group’s Christopher Rolland, meanwhile, asked whether Nvidia delivered the “greatest beat of all time” with its outlook. He called the upside “unfathomable” as Nvidia capitalizes on generative AI and an inflection in accelerated computing. “It looks like the new gold rush is upon us, and NVIDA is selling all the picks and shovels,” he wrote, while keeping a positive rating on the shares and raising his target price to $450 from $350. NN: I love one way bets because they are usually the wrong way. Did they mention they have no capacity to make any of these chips sine they are designers not manufacture? Unlike the competition that have the capacity to design and manufacture.   Or the fact that their manufacturing partner in Taiwan  is in about to be attacked by China. Or the fact that the foundry where they are making these geeeeWIZZ chips have not geared up to make the little buggers. Not in the expected quantities their rosy projections suggest they will need to meet their profit projections…. Or the next generation chips are coming from AMD and  will be our later this year??? ……

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Goldman Sachs Predicts An Oil Price Rally

Goldman Sachs continues to be bullish on crude oil and other major commodities, expecting a rally after the biggest-ever destocking in commodities that is currently underway. Should major economies, including the U.S., avoid deep recessions, the foundations for a rally across the commodity complex remain intact, Goldman Sachs analysts wrote in a note, although they admitted their price calls have been wrong so far this year. “Bulls, like ourselves, find comfort in the fact that end-use demand across the commodity complex has not shown recessionary signs and investment in supply remains elusive,” Goldman’s analysts said in the note, as carried by Bloomberg. “But this misses the point that we were wrong on price expectations.” Although prices continue to move opposite Goldman’s predictions, we are currently seeing what “It is likely the largest commodity destocking the complex has ever witnessed.” Investors are also cashing in on hedging, and all these factors are setting the stage for commodity price increases later this year, the investment bank said. “The absence of a recession would likely lead to higher oil and commodity prices as well as higher rates, to which equities would likely react poorly,” Goldman said. “Despite weak manufacturing-related demand, overall demand and inventory data across the commodity complex support our more bullish view,” the bank’s analysts added. Early in April, hours after OPEC+ announced it would reduce its combined oil production by more than 1 million bpd between May and December, Goldman Sachs raised its price forecast to $95 from $90 a barrel at the end of the year for Brent Crude. The bank also raised its Brent forecast for 2024, now seeing it at $100 at the end of the year from an earlier projection of $97. Early on Wednesday, Brent was trading at just below $78 per barrel, rising by around 1.5% on the day following estimates of a large U.S. inventory draw and a warning from the Saudi energy minister for short sellers.

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Oil Prices Rise On Signs Of A Tightening Market

Oil prices rose in Asian trade early on Wednesday, following estimates of a large U.S. inventory draw and a warning from the Saudi energy minister for short sellers.    In early morning trade in Europe, Brent Crude was up above $77 per barrel, at $77.56, rising by 0.96%. The U.S. benchmark, WTI Crude, had risen by more than 1%, and traded at $73.73, up by 1.12% on the day. Crude oil prices rose for a third consecutive day early on Wednesday, after gains on Monday and Tuesday, as the American Petroleum Institute (API) estimated late on Tuesday that crude oil inventories in the United States fell by 6.70 million barrels last week, compared with analyst expectations of a 525,000-barrel build. Gasoline inventories dropped by 6.398 million barrels after falling in the week prior by 2.46 million barrels. Distillate inventories declined by 1.771 million barrels after decreasing by 886,000 barrels in the week prior, API’s data showed.   U.S. gasoline inventories are at the lowest level just before Memorial Day since 2014.  Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, on Tuesday warned traders, again, against shorting oil futures, less than two weeks before the OPEC+ panel on production policy meets on June 4. The comments from the most important oil official in the world’s top crude oil exporter raised speculation that OPEC+ could surprise markets again when the ministers of the alliance meet in early June. “Energy traders have quickly learned that when it comes to oil prices, you ‘Don’t fight the Saudis’ as they will do whatever it takes to defend prices,” Ed Moya, senior market analyst at OANDA, said late on Tuesday.  NN: They will son learn that the Saudis are targeting oil ABOVE $90 a barrel. And they can make it happen!

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UK’s inflation “DOWN” (ha ha ha ha) to 8.7% in April

The annual inflation in the United Kingdom came in at 8.7% in April, down from March’s 10.1% but slightly higher than projected, the Office for National Statistics (ONS) revealed in its report published on Wednesday. On a monthly basis, the figure went up by 1.2%. The Consumer Prices Index including owner occupiers’ housing costs (CPIH) jumped by 7.8% year-on-year, improving from March’s 8.9%. Month-on-month, it grew by 1.2%. The Consumer Price Index (CPI) excluding food, energy, alcohol and tobacco observed an annual increase of 6.8%, advancing from the 6.2% registered the previous month and reaching its highest rate since March 1992. “The easing in the annual inflation rate in April 2023 mainly reflected price changes in the housing and household services division, particularly for gas and electricity. This was offset partially by upward effects coming from recreation and culture, \\alcoholic beverages and tobacco, communication, and transport,” the report concluded. NN: Its not AI you need to be worried about. Its the lie of cheating politicians…. No matter what tools they use to deceive you. Reality is inflation north of 4% any where in the world is a crises… and any use of the word down is bullshit!

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Saudi Arabia’s Energy Minister Tells Short Sellers To ‘Watch Out’

Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman has warned traders, again, against shorting oil futures, less than two weeks before the OPEC+ panel on production policy meets on June 4. Prince Abdulaziz bin Salman promised oil speculators back in 2020, “I’m going to make sure whoever gambles on this market will be ouching like hell.” The OPEC+ cuts announced in early April this year caught speculators by surprise and threw the short sellers under the bus. Amid the oil price selloffs following the banking sector jitters in March, top OPEC+ officials had spent weeks reassuring market participants that the plunge in oil didn’t warrant any tweaks to the production cuts agreement. Until they decided it did. The announcement of the cuts in April came when markets were closed, and OPEC+ has undoubtedly bet on a jump in oil prices the moment the markets opened. Oil soared by $6 per barrel on the Monday following the announcement, the biggest single-day surge in prices in over a year. A week after the announcement, data from exchanges showed a massive short covering and a renewed buying spree in oil futures in the two days after OPEC+ said it would keep another more than 1 million bpd off the market for the rest of the year. The most recent positioning data, for the week ending May 16, showed that traders continue to be bearish on crude and continue to dump bullish bets.  Near-term concerns about the economy and the growing fears of recession, coupled with the U.S debt ceiling saga, have turned the sentiment on the market more bearish than it has been since 2011. But the Saudi energy minister warned traders against shorting oil.

“I keep advising them that they will be ouching — they did ouch in April,” Abdulaziz bin Salman said at the Qatar Economic Forum on Tuesday, as carried by Bloomberg.

“I would just tell them: Watch out!”