Gamma Lab Girl 🧪 retweeted
SK Hynix will report earnings before 9AM Seoul time, or 8PM ET. Before, so any time after they get done waking up over there.
I think the VIX weekly settles around 18 tomorrow morning. There is the potential for an after hours/overnight swing.
Gamma Lab Girl 🧪 retweeted
The Fed may be priced for a pause, but the options market is NOT pricing a quiet week. With SPX elevated event volatility and defensive positioning, the bigger question isn't what the Fed does—it's how far the market might move in response.
spotgamma.com/fed-pause-opti…
Gamma Lab Girl 🧪 retweeted
What Sunday morning looks like after a one-night stand with a European man:
German - windows open at 7:42am, starts recycling the bottles
Dutch - sends you a €6.80 request for half the condoms and the Uber
Italian - his mother and fiancee already called twice
Spanish - neither of you has slept yet
Polish - give you a vodka shot and explains why Black people are the worst to be around
French - smokes naked by the window, acts offended you're still there
Gamma Lab Girl 🧪 retweeted
Thoughts around AI
1) Given AI is the largest technology revolution in history at roughly 3.5% of GPD (larger than electrification, highways & internet combined); there is overinvestment due to the potential rewards for the eventual winners.
2) But much like during the Internet buildout, which had several large drawdowns including in 1997 (Asian currency crisis) and 1998 (Russian bond default), and then ripped higher, the question is whether this is THE TOP.
3) AI had 3 separate investment waves: training, inference and now Agentic
a. Agentic demands 10-100x more tokens than inference and started with OpenClaw in January for the tech savvy followed by Muse in late September for the rest of us.
4) Currently, the market is repricing two things
a. Financing costs are higher in both debt & equity mkts
i. Debt- $CRWV unsecured debt trading at 15%
ii. Equity- expected timing for AI related IPOs like OpenAI, Anthropic delayed earlier this year while filed IPOs of Firmus, AirTrunk, NScale, SB Energy delayed/ pulled
iii. Meta 8K “timing is important to secure capital before competitors saturate various funding options… in an increasingly challenging environment for raising capital.”
b. AI native growth rates slowing
i. Anthropic revs 145% q/q in Q2 to 45% in Q3
ii. Openweight driving ASPs down ~50% since May
5) Datacenter moratoriums seem to be the only thing both parties agree on
a. This could get worse after the mid-terms with a less AI-friendly political climate
In summary, because of the advent of Agentic, I do not believe this is THE TOP. But having higher cash levels and being circumspect as the market reprices has been important. This has been my advice for the past several weeks.
Unfortunately, my belief that it was time to start putting money to work for at least a short-term rally this past week due to oversold conditions in areas like semiconductors has been early so far. The SOX was down 3.2% last week vs the S&P down 0.5% but time will tell.
$MSFT $AMZN $GOOGL earnings this upcoming wk
1) I think much like with $Meta earnings this past week where I previewed concerns, the stock reactions for the above three will have a lot more to do with their comments around future capex investments, expenses, cash flow and financing needs.
2) I worry whether a datacenter moratorium causes an issue with cloud growth guidance for the December quarter despite very strong growth in the September quarter. NextDC in Australia cut their rev guide by 22% for CY27 due to local community pushback and the stock was hit for 39% last week.
Microsoft seems committed to being cash flow positive and I see them being an ultimate winner in enterprise AI. 1. They provide a safe environment to run Co-Pilot AI applications given almost all S&P companies run M365 already. Co-Pilot seats were 30M+ in the June quarter up from 20M+ in March and 15M in December.
2. One potential risk is their high margin PC business being impacted by the large declines being caused by surging memory prices.
3. Azure expectations vs their guidance of 45% y/y for September vs 43% in June have also picked up given the share gains being seen by OpenAI against Anthropic recently in enterprise.
Google should see accelerating cloud growth & be an ultimate winner in consumer AI through their Android distribution on smartphones. My short-term concerns are the following:
1. Cash flow was negative for the first time since being a public company in the June quarter.
2. A slight miss in search revs in the June quarter raise concerns around AI Agents not looking at ads.
3. More aggressive analysts expect GCP growth of ~100% y/y for CQ3 y/y (but this includes TPU sales) up from 82% in CQ2 and 63% in Q1. This is more than double the growth rate expected for AWS and Azure so I worry that these datacenter moratoriums may on the margin impact the revenue growth possible at GCP.
4. Google needs to get out their consumer Agentic AI product. This should be a catalyst for their stock given it should integrate with the 14 Google products that have over 1B users each.
Amazon should benefit from physical AI improving efficiency in their heavy asset e-commerce business.
1. I also think their e-commerce demand is solid as shown by them hiring more seasonal workers (+20% y/y) for the first time since 2023.
2. But as the biggest public cloud vendor and the one with the most capex, could they be too big to escape the data-center moratorium impact on their December quarter? As an example, Amazon last week abandoned its plans for a large 4 building datacenter in Loudoun County Virginia which has been dubbed "Data Center Alley." AWS grew 28% in Q1 an accelerated to 37% in Q2 with no formal guidance but hopes for a slight acceleration in Q3.
3. However, Amazon reports on Thursday so their AWS expectations will be reset by whatever results are from Microsoft Azure and Google GCP on Wednesday.
Best of luck in the week ahead.
Gamma Lab Girl 🧪 retweeted
Great read, obvious that most of the data supporting this has not been shared on the blog, but who gives this much away for free anyway?
THE PERKINI REPORT: THE 2028 REALITY CRISIS
What if the most obvious financial bubble in all of history turns out to be.... a bubble... and what if that is just really.... bearish?
there were signs, there are always signs 🤣
free link:
hub.tslombard.com/the-perkin…
inspired by @citrini
Gamma Lab Girl 🧪 retweeted
BofA’s Hartnett (Flow Show) says “we stay tactically risk-off until mid-Nov,” expecting a “down-in-yields, down-in-stocks, down-in US dollar” trade. He sees the 30-year Treasury yield heading toward 5% and the Dollar Index dipping below 100.
What ends it:
-A Democratic midterm sweep gets “fully priced-in.” Polymarket odds are now 68%, up from 63% a week ago.
-The ECB and France “stop rout in French bonds.”
-An “AI capex cut or extreme equity issuance announcement (think Boeing 2024) causes peak in AI hyperscaler debt spreads.”
He sees a Dem sweep as a negative for earnings. It would bring an “end of lower tax/regulation regime,” and Trump would be “less able to coerce resources & capital into US-China AI priority.”
Risks cut both ways. Peace deals on Russia/Ukraine/Iran could knock $10–20 a barrel off oil. Alternatively hyperscaler bond spreads could surge past 200bps, leaving investors deleveraging on “shadow banking credit event risk.”
Gamma Lab Girl 🧪 retweeted
Dear market,
Pick a f*cking side and trend for awhile
We don’t care which direction…
Sincerely,
Traders
Gamma Lab Girl 🧪 retweeted
Sat Oct 24
Risk-off, by the numbers.
Credit turned first. High-yield spreads jumped 13 bp on 25 Sep, and on Thursday, 22 Oct they hit 3.40%, the widest of this move and up 60 bp in a month.
In between, SPY made one more high on 6 Oct that credit never confirmed. The rally stalled, credit cracked, and stocks rolled over.
The bigger risk sits under the AI trade. BofA is warning clients that their desk's line in the sand is hyperscaler bond spreads past 200 bp — the trigger for a deleveraging wave. AI capex is now debt-funded, and credit is where the strain is showing first.
I rotated out of SPY into alternatives when credit first cracked. That basket is +5.7% since, vs SPY −0.7%. With spreads making new wides this week, I’ll refresh the basket on Monday. The rebalance is already tilting toward Treasuries as yields roll over.
In the meantime, our agents are defensive and watching four potential macroeconomic shocks, credit being the first to declare itself.
____________
Never advice.
Get your heads around this:
The concept = A dry forest, then sparks.
Crises need two things: dry conditions and a spark.
The current conditions are in place: AI capex near 3.6% of GDP, circular AI financing, CAPE 40.7, the 30-year above 5.6%, and the Fed hiking again.
Journal of Finance (2022): when borrowing and asset prices boom together in one sector, the odds of a financial crisis rise to roughly 40%, versus about 7% otherwise. (Sound timely?)
Conditions set the risk. Sparks set the timing.
The 2026 sequence:
• Mid-Aug: SPY stalls while AI keeps rallying
• 23 Sep: bond-volatility spark, MOVE +21% in one day
• 25 Sep: credit spark, high-yield spread +13 bp
• 6 Oct: SPY and AI make highs; credit doesn’t confirm
• 14 Oct: reversal
👀 Last week, a second credit spark: the high-yield spread widened another 13 bp to 3.40% on 22 Oct, a new wide for the move.
___________________
Note: This is a snippet from the portfolio strategy I've been describing that puts money to work in alternatives, rather than cash equivalents (e.g. SGOV) ... not just on breakdowns from consolidation ... but when dry forests and sparks coexist as rallies stall.
Gamma Lab Girl 🧪 retweeted
🇮🇱🇮🇷🇺🇸 A possible Trump-Netanyahu deal holds the Iran strike until after Israel votes on Tuesday... and a war after the US midterms lands right in the middle of Netanyahu's coalition talks
Israel's election looks headed for a deadlock between the two blocs, and the fastest way to move opposition parties into Netanyahu's camp is a country back at war.
Shaiel Ben-Ephraim, former IDF intelligence officer, is hearing that Trump and Netanyahu struck a deal, with the plans on ice for days, not cancelled:
"There's going to be a massive escalation in Iran very soon, but it's not going to be before the elections."
Striking before the vote would look like an election stunt and could backfire, and Shaiel flatly rejects the idea that the election gets suspended at all.
He says the IDF has no plan beyond hitting and blockading until something snaps, and that Israel's own intelligence reads the regime as sturdier than before the war.
@academic_la @WeTheBrandon
Gamma Lab Girl 🧪 retweeted
Option implied cumulative FOMC outcomes
Hike probabilities continue to melt away for October
1/4
Gamma Lab Girl 🧪 retweeted
messaging my wife a link containing proof of her husband cheating on her from an anonymous instagram account and then when she clicks on it texting her to let her know she failed the family phishing test and she has to retake my cybersecurity course
Gamma Lab Girl 🧪 retweeted
When skew gets really pumped, it's telling you something about what end users have already done.
It only gets pumped like that if end users have bought a load of puts and/or sold a load of calls. So dealers' inventory is shorter skew than it normally would be, and the vanna sitting in their books is bigger than normal.
That matters if the market actually moves directionally. The steeper the skew, the faster dealers' books flip position when spot moves. Even a fairly modest sell off can be enough to flip them quite short.
Vanna's a funny one because it's one of the Greeks that means two things at the same time. How much does my vega change when spot moves? And how much does my delta change when vol moves?
The steeper the skew, the more impact this Greek has on the market because positioning is likely quite large and the second order Greeks will need hedging when either vol or spot move.
Gamma Lab Girl 🧪 retweeted
I’m afraid to ask, but I will ask it for education purposes:
Did you make money today?
73%No I’m eating ice for din
14%Yes shorted this ish bang
13%Flat don’t ask how
3,484 votes • Final results Gamma Lab Girl 🧪 retweeted
Replying to @jason51884717 @CashWithDara
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