Malignant 7
All Good Things Must Come to an End
A funny thing began to circulate among finance types on social media a few days ago.
“It’s been [fill in the number] days since the S&P 500 fell 2% in a single trading session.”
Yeah, that’s over now…
The streak ended at 356 trading days — going back to March of last year.
Indeed, the 2.3% drop yesterday was the biggest one-day decline since Dec. 15, 2022.
The streak that just broke? It was the longest going back to — gulp — the start of the global financial crisis in 2007.
Gee, what was it we were saying yesterday about how when a handful of companies dominate an index, it’s great on the way up — and really painful on the way down?
As we noted in real-time during yesterday’s edition, the drop was fueled by rotten quarterly numbers from two of the “Magnificent” 7” stocks — Tesla and Google.
But as it happens, the other Mag 7 names fell in sympathy — including Microsoft, Apple and AI chip darling Nvidia. The rout was big enough for mainstream media to trot out their stock photos of “worried floor trader” (dig the Izod logo on the sweater!)...
All that said, one day’s market action does not necessarily mean a rerun of the global financial crisis.
The Mag 7 names were getting too far out over their skis. And yes, when they pull back, that’s going to drag down the S&P 500 and the Nasdaq with them, at least for a little while.
But as we’ve been noticing for several weeks now — long before the mainstream began catching on a few days ago — the market is seeing a rotation out of the megacap tech-adjacent Mag 7 names… and into other sectors of the market that have gone unloved during 2023–24.
Paradigm’s AI and crypto authority James Altucher is noticing one particular beneficiary of this rotation — a niche of tiny stocks he calls superstocks.
They’re already on the move — but it’s subtle. Beneath the surface. Wall Street isn’t noticing. Not yet.
But James sees a catalyst for a huge move on the near horizon — next Wednesday, in fact. “This is a ’profit trigger’,” he says, “that’s been known to send some of these stocks as high as 5,000% in a year.”
Precious Metals Pounded
Overnight, “Mr. Slammy” showed up in the precious metals markets…
The selling began shortly after trading opened for the day in Hong Kong. At last check, the bid on gold is down nearly $35 to $2,361. Silver is back below $28 — ouch. The HUI index of gold stocks is down 1.7% to 292.
Reasons? The shadowy forces that operate in gold and silver don’t need reasons.
In any event, the precious metals are no worse off than they were a month ago. If you don’t have your full allocation yet (Jim Rickards recommends 10% of your investable assets in gold), consider it a buying opportunity.
Crude continues its climb back from six-week lows, a barrel of West Texas Intermediate now fetching $78.71.
The economic numbers of the day do not signal an imminent recession, nor do they give the Federal Reserve any reason to accelerate its timeline for an interest-rate cut in September…
- The Commerce Department’s first guess at second-quarter GDP rings in at an annualized 2.8% increase, way more than expected
- First-time unemployment claims in the week gone by total 235,000 — more or less where it’s sat for the last six weeks
- Durable goods orders fell 6.6% in June, but that was severely skewed by canceled orders for commercial aircraft. Strip out aircraft and military hardware — both notoriously volatile month-to-month — and you get a jump of 1.0%, way more than expected.
Tomorrow the Commerce Department issues “core PCE” — the Federal Reserve’s preferred measure of inflation. Timing is everything; the Fed holds one of its policy-setting meetings next week, and chair Jerome Powell will hold a news conference on Wednesday.
Will Kamala Harris Keep Joe Biden’s Tax Pledge?
For the record: While Joe Biden promised not to raise taxes on households earning under $400,000 a year… Kamala Harris does not share that commitment.
The $400K pledge was something Biden repeated often both during the 2020 campaign cycle and during his presidency.
It wasn’t ever completely true; his proposal to raise the corporate income tax rate (never enacted) would have been a cost that companies passed on to everyday consumers. But in the main, it was a promise kept.
Now that it appears Harris is in line for the Democrats’ nomination, the Tax Foundation has gone back over Harris’ record in the Senate, as well as the proposals she made during her abortive 2020 presidential run, to see where she stands on taxes.
From where we sit, one proposal stands out from the rest.
As you may or may not recall, during the 2020 campaign cycle, the buzz among many Democrats running for president was a Canadian-style health care program branded “Medicare for All.”
To help pay for such a scheme, Harris proposed a 4% surtax on household income over $100,000.
OK, let’s give Harris the benefit of the doubt by reminding you this was 2020. Still, even if you adjust for inflation we’re talking about an income threshold of $122,000 now. That’s not exactly “soaking the rich.”
During the 2019–20 primary debates, Biden called this proposal “a refusal to be straight with the American middle class.”
Does Harris feel differently now? Who knows, but if you want to examine the Tax Foundation’s review of her record, have at it.
Great Moments in Web Domain Maintenance (Follow-Up)
Now for an update on a story we never figured would require follow-up…
We’ll start with the developments this week: “Philippine President Ferdinand Marcos Jr. has ordered the shutdown of a sprawling network of online casinos that have been linked to a slew of criminal activities,” reports the BBC.
“Known locally as Pogos, short for Philippine offshore gaming operators, these online casinos largely cater to players in mainland China, where gambling is illegal. But they have also increasingly been found to have been used as a cover for illicit activities, from telephone scams to human trafficking.”
We had no clue that this was a phenomenon… but as we chronicled just over a year ago, it was a Philippine online gaming site that took control of this URL still seen on the bottom of older license plates in the state of Maryland…
Wacky, right? My wife and I had these plates on our car when we still lived in Baltimore — commemorating the 200th anniversary of the War of 1812.
Up until 2022, the web address took you to a website for a nonprofit in charge of various bicentennial-related events — although the site hadn’t been updated for several years.
But someone dropped the ball and didn’t keep the registration current. As of early 2023, the URL took you to, yes, a gaming site based in the Philippines — complete with the obligatory cleavage on its homepage...
To be clear, we have no idea if whoever controlled the URL had any links to “telephone scams” or “human trafficking” or anything else.
But in any event, they don’t control it anymore. Turns out that a few days after the embarrassing story got out last year, the Maryland Motor Vehicle Administration managed to reclaim the URL. “The MVA engaged the services of a reputable domain broker and was able to successfully recover the URL,” said a press release, without getting into detail.
As we said at the time, imagine if porn hucksters had gotten their hands on it…
Mailbag: A Classic Wall Street Tale
After a reader called out Jim Rickards in yesterday’s edition, invoking a remark by former Treasury Secretary William Simon (1927–2000), the reader wrote back (and we’ve added a thing or two in brackets for clarity)…
“Thanks for responding. I was recruited to work for Bill Simon at Salomon Bros.; I was supposed to partner with John Meriwether [who left Salomon under a cloud in 1991 and went on to launch the doomed Long Term Capital Management].
“I was, as agreed, waiting for my adjusted compensation from Merrill Lynch and in November or December [1973], Bill called me and said he was becoming energy czar so I passed on Salomon. I am a few years older than Jim.
“Bill's rules (somewhat as a joke but also adhered to) were:
- If you had an MBA you could come into the trading room but not sit down.
- If you had a Ph.D, you could not come into the trading room at all.
“And this was when Sidney Homer [author of the magisterial A History of Interest Rates] was considered the best bond economist in the world.”
Dave responds: What a great story. You should’ve said you had a personal connection — never mind your own been there, done that background!
I’m not old enough to remember Simon’s stint as Treasury Secretary in the mid-’70s, much less his time at Salomon before that. But I was aware when his book A Time for Truth became a sensation a couple of years later. (According to Wikipedia, it was ghost-written by the libertarian firebrand Edith Efron.)
Feels as if that book along with Milton Friedman’s Free to Choose helped shape the zeitgeist that made a critical mass of people receptive to Ronald Reagan’s message that “government is not the solution to the problem, government is the problem.”
Too bad Reagan couldn’t execute on that message, but that’s a story for another day. Thanks for the reminiscences!
