Conditions Are Ripe for Negative Spiral: 3-Minutes MLIV

Added: 2026-05-28

[00:00:00]Yesterday we had a conversation mark, about how you were turning increasingly bearish. Well, I guess you must be feeling pretty vindicated this morning with the price action overnight.

[00:00:10]Uh. Good morning.

[00:00:11]Well, it's very short term. And this is a market where the instinct to buy the dip is extremely strong. Uh, at least in the short term, yes.

[00:00:18]It has gone in the right direction from yesterday.

[00:00:20]I think some important context here is that my narrative over the past year is that we're, you know, an incredible AI CapEx bubble, but we're in the inflation stage, that bubble. When you find a bubble.

[00:00:30]You hop on board and there's been periods where I've been tactically bearish right now. In March, I was tactically bearish because I thought the war was underpriced.

[00:00:37]I thought it was you get back in the eye bubble once we are trading the cease fire theme. Two weeks ago, after the Trump XI uh, summit, I said that was the time, I think, to turn tactically bearish again.

[00:00:48]Now that's not worked out that last leg. And that's one of the things that I'm finding a bit a little bit more. You know why I'm getting increasingly more bearish about the whole AI bubble. Because in the last two weeks we've seen a more negative, uh, narrative around the strait.

[00:01:03]We're seeing increasing economic damage every day.

[00:01:06]We're still not seeing the straight open.

[00:01:07]We're still not seeing energy flow freely.

[00:01:09]We're still seeing that the, uh, the more entrenched damage from the supply chain disruption. And yet the I mean, stocks continue to just go absolutely crazy. And it's because that wider connect that I started to feel that in fact, the air bubble may not go on to the next earnings season at least, which is my narrative up until yesterday.

[00:01:27]But in fact, we may be actually kind of seeing the popping around now.

[00:01:30]So that's kind of the new narrative that I'm trying to address in this week.

[00:01:33]Um, the short term price action helps a little bit, but it's, you know, there's this is the instinct to buy the dip is strong.

[00:01:41]Do you think they might. That's interesting isn't it.

[00:01:43]I mean, do do you think do you think it sounds like you're cautious?

[00:01:46]You think maybe the dip buyers do come in, uh, at this point and take advantage once again? And maybe that that tactical view of yours gets, gets derailed by that? Yeah, 100%.

[00:01:59]The dip buyers come in. I just think that they must be, uh, almost out of men to me. Look at almost any way to value anything. You look at the IPO's.

[00:02:07]You've got this here from space and open eye.

[00:02:09]You just look at the earnings projections.

[00:02:11]Everything is priced to extreme. So of course the dip is going to come in. The problem is I just think that real economics is going to squeeze them. And the dynamic is now is that so much of the real economy actually depends on the wealth effect from this kind of booming stock market. So the reason I'm kind of transitioning from, you know, the two weeks ago kind of tactically a little bit more negative on markets, but thinking you'd ultimately buy the step to not be convinced to buy the dip is that I think the conditions are now ripe for a negative spiral to start, because the economy's only holding up in this case, shift economy, because enough consumers have a positive wealth effect in the stock market booming, the stock markets start suffering, then they start consuming less. The economic damage gets worse.

[00:02:54]That means we start trading that negative economic narrative a little bit more aggressively in the stock market. So are I.

[00:02:59]Now, I think we're getting close to that tipping point where we can start a negative spiral. Uh, I guess I'm still on the fence.

[00:03:06]If this is the you know, this is really the top, but I'm now suddenly leaning that way as of yesterday, when I wasn't before.