Flagship Pod 81: Fear Moves the Market


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Now let's get into what we reviewed.


Here are the 4 key things we went over:

  • Why the market had a down week and what to expect this week

  • Where crypto is headed next now that Bitcoin has topped $30k

  • How the new competitors to Twitter are moving the market

  • Where we see key valuations headed moving forward

And if you're too busy to listen to the entire recording, below we included a compact summary of what went down.

To get all the juicy details, just listen to the entire recording.

And now, onto the summary 👇


We already had a bizarre week in the markets before Russia went and had a 48-hour coup. 

While we won't see the full reaction to the astounding news coming out of Russia for a few weeks, it was honestly pretty nice of the Wagner Group to keep their historical events entirely confined to a period where international markets were largely closed. 

Jokes aside, we're shifting back into a period of uncertainty that the market simply hates. The high of AI mania is finally wearing off and the major indexes all ended last week breaking their months-long winning streaks. 

That isn't to say the bull run is over, the market simply needs more data before we're really ready to believe in this rally. Another 18 months of interest rates above 5% is simply too much for the market to stomach right now. 

But the past few months of rallying have shown that the market believes there are going to be winners in this new normal as the Fed applies extended breaks to the economy. Companies that make it through 2024 in a strong position will only see it get stronger once the Fed loosens its grip on the money supply. 

So we're still seeing a lot of winners even during these doldrums. We simply need to ensure we're not buying too much into winners that are getting clearly overbought by market maina. 

So, let's sift through the grab bag of news from the last week and try to make sense of where the market is headed. 

Let's get into it 👇


A Quick Overview of the Russian Coup:

Of course, the big news moving the markets in a broader sense this morning is the aborted coup that went down in Russia over the weekend. We didn't get a chance to discuss this during our actual podcast, but it's important to add some analysis here as this could have a long-term and huge affect on the markets. 

You've probably already seen this all over the news, but let's do our own quick analysis. 

On Friday, there were reports that Russian missiles struck forces belonging to the mercenary group, Wagner PMC.  Wagner's leader, Yevgeny Prigozhin, has been critical of Russian military leadership for the past few months after his Wagner group was solely tasked with a brutal siege of the Ukrainian city of Bakhmut.

But this appeared to be the last straw as Prigozhin then released a video announcing he was going to march on Moscow to replace Russian military leadership. 

Then, over the course of Friday night and Saturday, a column of Wagner forces basically marched all the way from the Ukrainian border to the outskirts of Moscow largely unopposed. Whether this was the Russian military basically mutinying and announcing they were supporting Wagner or a conscious strategy by Putin remains to be seen.

And as soon as the Wagner forces reached the outskirts of Moscow, Wagner announced that a deal had been brokered by Belarusian president Aleksandr Lukashenko. Prigozhin gets to live in exile in Belarus and Wagner troops are being turned around all in exchange for a massive change in leadership at the top of the Russian military. 

The obvious market response to these bizarre events will be a small flight to safety. Whether or not the market views this as over remains to be seen. 

For now, we're closely watching oil and wheat futures to get a better sense of if this will disrupt supply chains or not. There will be really interesting second and third-order effects here as Russia re-stabilizes. We don't necessarily view this as a win for Ukraine unless their counteroffensive can take advantage of the temporary chaos to further gain ground.

Historical events like this take time for the market to digest, so we'll keep monitoring this for those downstream consequences. 


The Fear Muddling the Market:

Meanwhile, markets were down before all this coup business simply on the worry that the AI rally has lost steam. So, what's happening broadly? 

Most of this pullback simply feels like a mild flight to safety as major analysts are still afraid of potential 'unknown black swan events' that can hit when we're in this heightened interest rate environment.

As consumer credit card debt reaches all-time highs, analysts are fearful that this can cause a massive pullback in consumer spending. We've seen the beginnings of this pullback in earnings reports like Walmart and Target that show consumers shifting to necessities only.

However, with our economy running on debt, no one knows or can predict exactly how much debt the market can stomach. It's entirely possible that we keep accruing more and more credit card debt without fully breaking consumer spending. 

Meanwhile, a multi-year debt bomb hangs over some financial institutions in the form of commercial real estate. Even with massive return-to-office pushes happening nationwide, this is simply not enough to bring leases back to even half of pre-pandemic levels. This is one of those obvious and massive sources of potential contagion, but once again the market simply cannot predict where the hammer will drop there or how bad it will be. 

And to top it off there's a crypto rally -- which is happening on the heels of an SEC rampage from a few weeks ago. Listen to the recording to get our take on why it's happening and if we think it's sustainable.

But this isn't random either. With Blackrock filing for a spot ETF that tracks the price of Bitcoin, and Fidelity rumored to do the same, institutional money is now gearing up to flood the crypto space. The timing here is wild and suggests that Blackrock has confidence that the SEC is going to negotiate a regulatory framework that won't completely strangle the crypto industry.

While the futures of Binance and Coinbase are murky, institutions are basically promoting the future of crypto assets as a whole, which is causing institutional money to start trickling in. We have a long way to go until the real big money joins crypto, but these updates are really encouraging. 


Wrapping This Up:

These kinds of pullbacks happen when the market pushes toward recovery. We're going to see a lot more volatility for the next month until U.S. GDP figures get published and really clarify what direction the Fed is pushing the market.

Until then, we're tracking long-term trends and what companies are going to be the biggest winners from those trends. 

Real money is made during these times, but it is also very important to remember that we need to be cautious in the face of uncertainty. 

We'll keep you posted as the market develops.