You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. How I Learned to Love and Trade the AI Jobs and Deflation BombDeath to Financial $creeners, Testing Triple Momentum, A Conversation with Michael Cordano, and the Morning Letter
Editor’s Note: Given the gravity of the AI situation, ongoing pressure in private credit, and some important updates on our momentum research, I’ve opened up the Capital Wave Report to all readers this morning.
Good morning: Well, it’s been a very interesting few days. If you haven’t read the latest AI-panic, Citrini Research released an article the other day covering what I can only describe as the worst-case scenario for white-collar workers. It got 3,200 likes… So… people are clearly talking about this. I can put my economist brain on right now and look out and understand these deep concerns. We could talk about companies that are highly leveraged and have upcoming refinancing needs. I can talk about the challenge of purpose for people who may have spent years studying things that are about to be disrupted. The knowledge economy will be commoditized, and the time frictions are moving toward zero. The cost to write and research a big economic report may have run over $10,000 in the last two years, and now it’s down to about $200 + an hourly charge. As I said, AI is very deflationary to labor costs… and other friction costs (supply chains, transportation of information and capital). This is why I expect they’ll print a lot of money in the coming years to paper over the impact. This was the basis of inflation targeting in the 1990s… It was one of the most poorly thought-out policy stancesof the last 35 years, and it directly contributed to the dominance of just a handful of tech companies that benefited from cheap capital and the ability to survive and adapt across the economy. We live in a fiat system… robots don’t pay taxes… and our social security system is heading off a cliff… Politicians don’t understand AI… and regulators know that monetary expansion is much easier than the fear of societal realignment. I’ve accepted that AI can do a lot of the work and tasks that I do, so now I have to bridge out beyond it… where possible for now… and use it to scale. What does that mean? It means I’ve been taking a massive leap forward in about seven days. How I Learned to Love and Trade the AI BombThis is an investor and trading publication, and I’m a glass-overflowing kind of guy. So… I’ll put my trader brain on… and I’ll use this to my advantage… I spend an incredible amount of money each month on data sets, screeners, and subscriptions. Well, information is now a basic commodity, and the cost just collapsed. Claude's cowork at $200 a month now pays for itself, and picks up lunch three times a week. Instead of paying for data feeds that were largely based on publicly available data and APIs, we built six of them in a few days… Scott created me a personal options profit calculator…
We have an insider data feed directly from EDGAR… That’s $50 a month saved. We can build an F score, Z score, O score, M score… and any other score now, so that knocks out a few other platforms that we a few hundred a year… We now have a platform to track our Momentum reading that refreshes every 15 minutes…
And a few more tools that we’ll put together for readers. Why wouldn’t I want all of this in my own sandbox instead of 1) paying massive fees for data and 2) being able to solve the single greatest problem that I have in markets… The biggest bottleneck in my career has been the inability to code at scale and the time to figure out how to scale up trading strategies Scott and I both have ADHD, natural curiosities, and introverted personalities, so we can keep doing this for the next year. My life for the last week has felt like I’ve been binging a video game from morning until night… looking for possibilities… looking to scale. It’s a rabbit hole I’ve always wanted to travel down… because answers exist down here… solutions as well. I didn’t have $50,000 to build some of this stuff… sorry coders… now, we can do this in hours. Have you always wanted a Mortal Combat game about the Federal Reserve? I have… and now… For the first time… and I mean this in the most humble way possible… I feel like I’m operating with a coworker in Claude who has the ability to not only to find the answers to all of my scatter-brained ideas… but also to anticipate them and steer me into the conclusion that doesn’t keep me up at night. And so far as trading goes? This is an equalizer on a scale that is only at the beginning. For years, I’ve worked in academics, learning about various momentum strategies. I use a hybrid short-term momentum strategy that emphasizes breakouts and breakdowns, reversion momentum, and getting out of the way ahead of liquidity events. Now, I can stack strategies… longer-term approaches…introduce rules… and build conviction across all the models I’ve followed for the last decade, but never had the capacity or time to really fuse them… until now. I can take the academic work of several top academics I’ve followed for years, stack that on top of Value and Momentum is Everywhere by Cliff Asness, test alignments with JPMorgan’s Momentum Strategies Across Asset Classes from 2015… and fuse it into a high-conviction screen that builds my conviction and creates an even more advanced warning system than I already have. Did you understand anything I just said… Good… that’s the point. Claude got it. HERE’S THE MIRACLEI never got that job at Anchorage. I didn’t get hired by Goldman. I was last cut by McKinsey out of college. I didn’t land a gig with a large financial advisory firm in Maryland last year. Early on, I had a lot of self-doubt because I’d get to final rounds over and over again… but I’d always end up not getting that job that I really wanted at “that firm…” That faded with time… But at 8 am… on a Tuesday, I can tell you now… All those things I wanted to do at a big trading shop… that job I wanted but didn’t get at a big institutional firm… the ideas I wanted to bring to places that had data, capital, scale, and brilliant people but wouldn’t hire me because I didn’t get my MBA degree at Harvard, Chicago, Penn, Stanford, Northwestern, or Yale… (Happened twice…) I’m doing that job RIGHT NOW… at my breakfast table. In the last 48 hours, I accidentally backed into this.
What’s interesting is the differences and similarities between the results… My primary screen has held Texas Pacific Land (TPL) for about 5 days, and it’s up 15%. But it doesn’t even appear on this list because it has a different set of factors I’d previously overlooked… smooth momentum, value anchors, and more… I’m sharing it with you because… we’re operating in a financial lab… and we want to see how things work. These are momentum screeners (not long-term buys)… They’d be trades, with tight stops and an emphasis on key technicals.
On the breakdown side… where I’m always more interested… it’s a lot more of the same, but with bigger conviction against Visa and Mastercard… My other screen had led with Blackstone, Ares, and other private equity names since last week as well… This is really… an avoid list… or use put spreads…
And now that I can pluck insider buying information and inject this DIRECTLY into these screens at… the cost of the platform… I can flag instantly when executives are trying to call a bottom… and whether it has ANY effect on market and individual stock momentum. So… yes… I see the writing on the wall… I see the impact that AI is going to have… But for one moment… one tiny moment… This guy with all the natural curiosity in the world… a non-stop desire to try to crack ideas… the ability to say “What if I took publicly available value, momentum, and insider reports” and fused them in ways that I’d never thought possible… just to see what would happen and where I could build conviction… It’s exciting… and I hope you’re on board for this ride… My Conversation with Michael CordanoBefore we get to the update on momentum still in breakdown mode… we turn our attention to the thing that’s clearly rattling the markets right now: Liquidity. Michael Cordano of Alliance Wealth Advisors was kind enough to host me last week for a conversation on liquidity, markets, and the outlook for the year ahead. Michael’s not only a great host, but he’s also a subscriber here at Capital Wave Forecast…  I promise that I’ll get a new background at some point… For now, enjoy the conversation… and make sure to bookmark it as this private credit issue mounts. Traders FocusLet’s see who Claude plans to replace today. Maybe it’ll figure out how to take these dogs out at 5 AM so I don’t have to. Then we’d be talking. We woke up to a dashboard that’s a little worse than yesterday, but the S&P and Nasdaq are showing a potential divergence signal. The broad readings are still negative, but our intraday pressure gauge is starting to curve positive. The signal’s not strong yet. It’s just starting to flicker. But when those two systems start to disagree after a sustained bearish stretch, it can be the first sign of a turn, even if only for a session or two. We’ll be watching closely as the market opens. The Nasdaq is practically flat on a cap-weighted basis, up 0.5. The mega caps are quietly stabilizing even while the broader equal-weight reading stays negative. That’s the Mags trying to get going, but we’re a good way away from being out of trouble, and it’s going to take a real catalyst to change that. The S&P is still underwater on both measures, but the gap is narrowing. The Russell is a completely different animal. Deeply bearish right now. Small caps want nothing to do with this market. Either the readings catch up and confirm bullish, or the pressure fades back and we reconfirm bearish. That tension is your early squeeze signal. Watch how it resolves over the first few hours of the session. For any of that to play out, the VIX will need to come down. And not just drift lower. It needs to fall beneath 20 quickly. Right now it’s sitting at 21, and the trend that started back in December is still intact. The channel keeps walking higher.
I know it feels like Groundhog Day at this point. We’ve highlighted this thing a million times. But that pattern has to break before we can get comfortable pressing anything to the upside. Trade around the extremes until it does. We have to continue watching what’s happening in Japan, which remains a big question mark. PM Takaichi is expressing reservations to BOJ Governor Ueda about further rate hikes, which has the yen back under pressure and keeps the global policy picture uncertain. Between that, the tariff situation, and questions around the Fed, there’s no shortage of unknowns right now. Trump delivers his State of the Union tonight. We probably shouldn’t expect too much clarity on anything, but we’ll be watching. If the 1% pattern is playing out the way we think it might, we’re actually closer to a policy pivot than most people realize. The next move in that sequence is an aggressive leg lower that forces central banks to respond. The insiders will know before we do. We’ll see them rush in, and that’s the signal to start buying with both hands. We are not there yet. But we’re watching for it every single day. Until then, this is a rotational market that has to pull from one area to feed the next. Pick your spots. Keep your risk tight. Anything that pops into resistance should be considered a potential fade. We’re not going to feel comfortable until SPY is back above 690 and heading toward all-time highs. I’ll be live at 8:45 to walk through it all. Click here, and I’ll see you shortly. Market outlook
Momentum - Breaking Down Whatever progress we made last week got wiped out on Monday. The S&P fell over 1%, the Dow dropped 822 points, and our momentum reading went from flat to -15 during the session. We’ve now been negative on our broader readings for almost a full month... since January 28th.
The real pressure right now is coming from two directions. Financials continue to deteriorate, with the private equity and private credit names sitting at the top of our breakdown list for over a week. Insider buying has picked up in a few of these names but it hasn’t stopped the bleeding... when insiders are stepping in and stocks keep falling, that tells you something about the size of the selling on the other side. And the AI disruption trade is not slowing down. It seems to be picking a new industry to dismantle every other day... Monday, it was IBM, down 13% after Claude figured out how to handle COBOL migration. A new round of tariffs announced over the weekend isn’t helping either. The TLT is breaking out. Money is rotating into duration, and that tells you where the market thinks rates are heading. Consumer defensives are still holding up for now, but if those start to crack too, we’re looking at a very different situation. This doesn’t feel like it’s over. NVIDIA earnings hit Wednesday and that will set the tone for the rest of the week... and probably for the next leg in whatever direction this market decides to go. Insider Buying: Light Day on Both Sides
Top Insider Buys of Last 10 Days - Form 4 Documents
Market LiquidityCore PCE came in at 3.0% on Friday, and the bond market basically ignored it. The 10-year is sitting around 4.03% this morning, and that tells you the safety trade is overpowering just about everything else right now. Capital wants somewhere to hide, and Treasuries are getting the bid. Waller spoke yesterday and called a March cut a coin flip. He wants to see the February jobs numbers before making up his mind. That’s a shift from last week’s minutes, where a few officials were openly floating hikes. The committee heading into the Warsh transition is about as fractured as we’ve seen. Nobody agrees on what comes next, and the data isn’t making it any clearer. The 15% global tariff took effect this morning. The EU already paused ratification of its trade deal. What markets need right now is room for the Fed to ease, and that room keeps getting smaller. Stay positive. Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
|
Post a Comment
Post a Comment