Highlander

A Moment Of Silence / Jobs Analysis / China / Intel

“There can be only one” - Highlander

A Moment of Silence

Shrubstack is mourning the loss of one of our major Contras:

JP Morgan’s Strategist, Marko Kontranovic, has been fired for being too bearish for far longer than commonly acceptable on Wall Street. After all, JP Morgan cannot afford a bearish Strategist while it’s trying to win business in AI IPOs and flows in Nvidia. All these years and poor Kontranovic still hadn’t learned how to play the Game. Oh well. At least we will see more of him on Twitter…

There is an important lesson here:

Everyone forgives a Bull when they are wrong. Look at all these Stock Promoters who have survived the 2000s and the 2008s and are still with us. But none likes a Bear, especially when they are wrong! And let’s be honest: Kontranovic has been wrong for a while now.

This lesson brings us to a Shrub Axiom:

“The Downside of being Wrong and a Bear, exceeds the Downside of being Wrong and a Bull by a factor of 10x, creating an asymmetric incentive for Strategists and Investors to avoid being bearish.”

Meanwhile, the loss of a Boss-level Perma Bear constitutes a Meme Top. We wrote about Meme Tops here, but in summary: A “Meme Top” is not quite “THE Top”, but rather a short-term Top marked by a “meme” moment in time (in this case the firing of JPM’s Kontranovic).

We experienced a similar moment back in May 2024, when Morgan Stanley’s Mike Wilson “capitulated” from his bearish stance.

We warned back then that “Mike Wilson’s capitulation” could NOT be THE Top, for a simple reason: Mike Wilson was FORCED to capitulate by Morgan Stanley’s C-Suit, whereas True Capitulation comes from the Heart.

In a similar way, Kontranovic was pushed out. Since his capitulation did not come from the Heart either, this does not constitute True Capitulation, hence it cannot be THE Top, just a Meme Top.

A proper TOP requires True Capitulation, EVERYONE to be ALL-IN and Tom Lee’s S&P Price Target to be the average on the Street, not 20% above the rest!

Thankfully, we have Societe Generale’s Albert Edwards still with us…

…and as the Last Bear Standing, he deserves The Prize. We wish for him to remain a Bear longer than Queen Elizabeth served on the Throne. Bless.

There’s another important point to make here:

If there are no Bears left, is this Bullish or Bearish? That was a rhetorical question, but it fits nicely with the Election Volatility playbook, whereby we expect volatility to return in August / September! I strongly recommend reading that piece again!

As for me, I like to keep it simple:

I always find stocks to be long and I always find stocks to be short. And I always run my portfolio net long (mostly >50% net long), as I don’t want to suffer the fate of Kontranovic and have to fire myself! After all, this is still a Tamagotchi Yellen Market:

“In a world rife with Printing Presses and Tamagotchis, calling for Tops in Asset Prices is a fool’s errant!” - Le Shrub (May 27th, 2024 Shrubstack)

JOBS - A quick look at June’s Non-Farm Payrolls

Non-Farm Payrolls for June came in at 206,000 jobs (vs 190,000 expected). Unemployment meanwhile ticked up to 4.1% (from 4.0%).

As much as I love you all, I don’t want to go again through the pain of breaking down the Jobs Report and its nonsense. I did it last month and you can read the analysis and breakdown here. Everything still applies.

I will note a few points: