Below are some of the most interesting things I came across this week.
LINK“Speculation has run amok on Nasdaq”, writes . “And it’s not as though the speculation stops at the stocks themselves. It veers right into options land as well.”
CHARTOf course, options aren’t the only form of leverage available to traders these days. Leveraged ETFs have also exploded in popularity. “If we proxy these levered funds as alternative for margin debt, nearly $1T in additional leverage has been added in the last 15 months,” writes .
LINKAnd, as notes, “Momentum runs tend to reinforce the assumption that good times will roll, pulling in retail investors in the late stages. That’s happening now. American consumers have not been more bullish on US stocks since surveys began tracking this sentiment. Momentum investing looks poised to crash in a way that could hit many investors hard.”
QUOTEDriving the trend in momentum that has pulled in so much highly-leveraged retail buying has been the narrative around AI. However, as recently wrote, “Gen AI is probably the most overhyped technology I’ve ever witnessed in my 45 years following tech stocks.”
LINKIt may turn out that investors are overestimating the profit potential of the technology. “Will AI make the software industry more capital intensive and thus a lower operating margin business? If that is the case then equity valuations are very sensitive to a different narrative than the current one which is only focused on the growth component,” writes .
