"It's all the same Trade"

“It’s all the same Trade”. I kept hearing this phrase thrown around trading floors, especially in times of stress.

After all, when the margin clerk calls, it’s all the same risk to him: “SELL EVERYTHING!”.

Usually though, there is a safe haven bid somewhere, be it Bonds, be it Gold.

So when GOLD trades in line with the king of meme stocks, OKLO, you can tell that something is wrong.

Here’s the 30-day picture of GOLD vs OKLO leading into Friday’s CPI:

How can GOLD, the precious metal that’s been in a “bubble” for 4,000 years, trade in the same way as a newly-minted meme stock like OKLO?

It’s quite simple. Everyone is just long “Momentum”. It doesn’t matter whether it’s Gold or Meme stocks…

Quant Funds got particularly hurt during this momentum unwind, yet another proof that everyone wants to “blame” retail investors for these moves, but in reality it’s the big funds driving it...

… though you won’t hear Quants say “It’s all the same Trade”, but rather something pseudo-intellectual like “Correlations have tended to 1, thus invalidating our risk models” or some nonsense like that…

At the end of the day, I don’t think there’s much brain power involved with the “AI-powered algos” that are behind these Market moves. Just take a look at this:

If they trusted an “AI” to buy “First Brands”, a blatant fraud, imagine what else they trusted the “AI” with?

I reckon if they let their “AIs” loose, we would end up with 1,000 mini-versions of LTCM that would just be long Gold and Meme Stonks…

The funny part is that I feel this “unwind” is most likely over at this stage, and none of this may matter next week as we get “key events” such as the Mag7 earnings, the Xi / Trump meeting, the Fed etc, at which point the humans may be let out of their caves to take over the “steering wheel” of their portfolios once again.

What we saw in the last couple of weeks was likely a preview of a wider “unwind” that may (or may not!) take place later down the line.

All we can do is maintain a Barbell approach to our Portfolio (latest portfolio review here), balance the Two Wolves and, of course, “Don’t Be Stupid”!

PS. *We recently launched a merch store where 100% of the profits will go to Charity. The Shrubstack merch store can be found here. Thanks to all who have purchased already!

Good luck out there!

🌳🙏

Disclaimer:

This isn’t financial advice. This is the equivalent of Monty Python for finance but worse: This is the trading blog of a shrub.

Don’t be Stupid. Seriously. How many times do I have to repeat this ….