A Mega Bearish Setup

On Friday, the Nasdaq closed down 4.8% or a 1450 point drop, its biggest point drop ever. To put things into perspective, after the 2000-Dotcom Bubble burst, the Nasdaq bottomed in October 2002 at 1,108 i.e. it dropped more points in a single day than what one could’ve bought the Nasdaq for 24 years ago.

We warned extensively as to why this drop could happen in a series of articles titled “The Wall of Supply”, where, in simple terms, the upcoming supply of Mega IPOs such as SpaceX would suck liquidity from everything and put a strain on the Market:

This dynamic got exacerbated by Google skipping the queue to raise $80bn in Equity, and now META looking to do the same, because they know that whoever is left last to raise, will be left without a “chair” in this game of “Musical Chairs” and risk oblivion..

Another bearish argument is that even “Boomer” fund managers are already all-in the AI trade, proof being that even Buffett developed FOMO at the tender age of 100 to put $10bn into Google in its quest to create a “Digital God”, though we know it’s not Buffett’s doing but the new guy’s:

We still called Nasdaq at 30,666 the “Buffett Meme Top” ™️ because it sounds poetic.

But this is not why I’m sitting on a fine Sunday to write this.

Usually market commentators come out after a correction to calm you down that, even if in the short-term the market goes lower, eventually the market rebounds into much higher levels after 1-week, 1-month , 1-year. I did my part on Twitter:

…but I’m now going to tell you the opposite:

In the short-term we might be ok, but I’m seriously worried about the long-term …

…and I’m not talking about the Markets. I’m talking about Capitalism & Freedom.

The US Government is considering taking stakes in AI companies like OpenAI, Anthropic and xAI so that .. “American people can benefit”…

Source: FT

I know that every Wall Street monkey would sell their soul for a 2% bounce in the Nasdaq … and indeed this could be taken as positive in the short-term but …

… WHAT ON EARTH ARE WE ACTUALLY DOING HERE?!!!

Yes, I know the government already has stakes in Rare Earth Companies and Quantum Companies and Intel but …

… what are we doing taking stakes in corporations whose product can covertly influence public opinion and even “hallucinate” a new version of history?!

Before you all get triggered that I’m suffering from Trump Derangement Syndrome (TDS), let me make one point abundantly clear:

IT’S NOT TRUMP I’M WORRIED ABOUT, IT’S THE NEXT GUY (OR GAL)!!!

Don’t believe me? Bernie Sanders is proposing a bill to give the public 50% of AI companies (source)…

Now imagine if a socialist politician becomes President.

One can say that I’m actually suffering from Socialist Derangement Syndrome (SDS), but those who lived under Socialism know very well that it usually devolves into Authoritarianism.

Remember the level of government control we had during Covid?

The US wasn’t as bad as China…

…which is one of the reasons why China trades at 12x PE and the S&P trades at 25x, but those reasons could quickly disappear…

Here’s one: Chamath highlights the pricing gap between the best-in-class AI models to open-source AI models like Deepseek (tweet here):

He adds that “you can expect the run rate revenue growth of the frontier labs to go down meaningfully and the revenues of the open models to skyrocket.”

Gee, I wonder what that could mean for OpenAI…

… maybe it would need a bailout AFTER the US taxpayer becomes a shareholder…

…which reminds me how, back in my day, the government used to bail out companies AFTER they went bankrupt, not AFTER they reached $1 trillion valuations!

I guess we need a meme for that:

This is all such nonsense, I’m outta here.

Good luck out there!

🌳🙏

Disclaimer:

This isn’t financial advice. This is Parody. This is the equivalent of Monty Python and Spaceballs for finance, but worse: This is the trading blog of a shrub. For all you know, I could be a 15-year old paper-trading out of my parents’ basement. Don’t be Stupid. Seriously. How many times do I have to repeat this.