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Tuesday, August 8, 2023

AI Bubble Already at or "Near It's Peak" says Morgan Stanley

It was only a couple months ago, when a boom in AI technology spending was credited with a historic short squeeze in NVIDIA $NVDA shares, and now Morgan Stanley is already calling it a bubble? 

If Nvidia Is a Proxy for the AI Bubble, It’s Nearing Its Peak, Morgan Stanley Says

 Of course I've been pounding my fist on the table on this for several weeks, and I even called the recent reversal in AI stocks. Morgan Stanley is a little late to the party!  

$UBOT (2X leveraged AI BULL ETF) Too bad there isn't a bear ETF to match this fund! 

Judging by the volume on that chart, the AI pump began to take shape just before short covering ahead of the Memorial Day holiday, and that's really what this rally was all about. 

Of course once the hedge fund managers return from their summer homes, they're probably going to take this market back down, just as they drove it up, and I'm already seeing several micro-sectors crushed - for example Airlines.    

China Bubble Bursting 

China actually led this entire tech rally, with reports that the China reopening was going to lead a recovery. Then only a few weeks ago, Chinese stocks were once again being pumped, with talk of "stimulus"? Another fortune cookie crumbles. 

Energy and commodity prices falling 

Actually the bubble - after all the covid (excuse) spending -  is still unwinding. This is the price you pay for over-printing in order to try to avoid a recession. All the money printers have managed to do is to temporarily inflate prices; on everything from cars, to equities.  

Now comes deflation, and a natural wave of contraction, after an artificially created boom. 


 It seems like it takes several weeks for the powers that be to engineer a sell-off. 

Just look at how long it took for them to take Apple down. 

Speaking of Apple 

The lame stream media is trying to make a big deal out of the pullback in $AAPL shares, but what they fail to mention is that tech is not selling off. Most big tech stocks were up again yesterday, as the marketeers continue to play a game of Whac-A-Mole. 

I refuse to play that game. I can't sit in a leveraged bear ETF for weeks at a time waiting for a market to correct, when Wall Street sharks would rather play a game of cat and mouse, than take profits.

In certain situations you can hold a leveraged ETF long term, but leveraged funds do not retain their value in a sideways market, and if you happen to get caught on the wrong side of a nasty reversal, you can forget about ever getting back to even. 

Thankfully, I saw the short squeeze coming, after memorial day, but until tech enters a real corrective wave, the short trade is going to be a waste of time.

The Broader Market 

This morning market futures are weak, as expected: 

Yesterday's rally was only to a lower high, so I suspect we aren't finished building a base, 

Take Care, 


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