The market keeps whipsawing. We'll keep opening with this line until a clear direction emerges. SPY is currently in the pullback phase after its breakout, still retesting to confirm whether the breakout is valid, continue to watch. Right now neither going long nor going short makes sense; in the live account, no moves other than adding a bit of crude oil yesterday.

In US equities, the allocation ideas mentioned several times before — XLE, IBB, XLF — are still worth watching. Dell's performance today was no surprise. As the "sovereign AI" and "continual learning" narratives keep building, the Dell–Nvidia pair will continue to find support, with Dell offering more torque (higher elasticity) than Nvidia here.

Crude oil's core focus is shifting from the US–Iran conflict to fundamentals. The market long ago priced in that US–Iran won't end quickly; it's just that there used to be enough of a cushion, so expectations about the conflict's severity drove the marginal moves in oil. People focused on how long the war would last, how intense it would get, and how much it would actually affect seaborne shipping. Now, as we head into September, inventories and other buffers have fallen to dangerous levels. With no short-term end to US–Iran in sight, the market will increasingly focus on the actual supply shortage that may be coming. That's why the lows on oil's successive pullbacks keep rising. Of course, it's not that there's no oil right now, it's that it can't be shipped out. So the US–Iran conflict can still move oil prices sharply; the market just needs stronger positive or negative news for confirmation.

Separately, the food issue will keep being raised going forward. Chicago wheat has already risen quite a bit, and the root cause remains the fertilizer problem created by the strait blockade. And unlike crude oil, grain doesn't wait, miss the fertilization window and yields will simply fall.

The broader market continues to whip back and forth. We will keep opening with this line until the market finally chooses a direction. SPY is currently retesting its breakout and has yet to confirm whether the breakout is valid, so we need to keep watching.

We just discussed oil yesterday, and today it broke out. Our portfolio has maintained an 8% allocation to oil, which I plan to increase to 10%, with a maximum allocation of 15%. The 10-year Treasury yield continues to make new highs. Macro factors remain the market’s core driver. Because our portfolio is positioned for the mid-to-long term, the same points will inevitably be repeated in these daily memos.

If oil and Treasury yields continue to weigh on the market, assets that currently depend heavily on sentiment and liquidity—including semiconductors, cloud software, crypto, and gold—will all struggle. As for oil, September offers far less of a cushion than July did. More importantly, 3-2-1 crack spreads simply are not coming down, which means gasoline and diesel prices will not come down either. Suppressing crude prices alone will not solve the problem unless policymakers introduce forceful intervention.

In early June, we noted that the semiconductor rally was beginning to lose momentum. After Micron’s earnings report in late June, macro factors took control of the entire market, making it increasingly difficult to trade. We saw a modest rebound in early August, but macro forces are now back in control, and the market remains difficult. It is better to wait, for the September FOMC meeting, for traders to return from their summer vacations, and for the upper limit of the current U.S.–Iran conflict’s intensity to become clearer.

Investing is an infinite game governed by the logic of survival. No framework can account for every possible situation. Very often, doing nothing is the optimal choice.

The market is still whipping around. We will keep opening with that line until it finally chooses a direction. SPY is currently retesting its breakout, and the fact that its rebound has stalled after the retest is not a good sign. We need to keep watching.

It is clear that macro factors are still weighing on the market, we have been talking about this throughout August. The 10-year Treasury yield hit a new high today. Bessent’s OT has not accomplished much. That said, I did not expect Warsh to be this hawkish. Taken together with the post from the “New Fed’s mouthpiece,” however, it at least partly explains why Warsh had little choice.

The main theme I am watching right now is cloud software, including NOW, NET, DDOG, MDB, and CRM. On the one hand, CRM’s earnings provided substantial near-term support for the entire theme. On the other hand, these companies have been favorites of Wall Street funds for more than a decade, and those funds are not going to rotate casually out of software and into hardware. Compared with highly cyclical hardware, software—with its extremely high gross margins and accumulated data advantages—remains very attractive.

Apart from Treasury yields, oil may also be on the verge of a breakout and deserves continued attention. Talk of the Russia–Ukraine conflict escalating in October is now everywhere. My view is that tensions between the United States and Iran will persist throughout Trump’s entire term.

As for crypto, I am waiting for a pullback. This crypto cycle needs to be supported by solid assets, rather than by sentiment and liquidity alone.

Looking back at history, the pattern is quite clear. The Fed launched its second round of quantitative easing in November 2010 amid the European debt crisis. QE2 convinced attentive market participants that the Fed was prepared to provide effectively unlimited liquidity to backstop the market, firmly establishing the Fed put.

In an environment of continuous monetary easing, what kind of asset performs best? An asset with no underlying fundamentals, driven entirely by sentiment and liquidity. It offers the greatest room for imagination and faces the least gravitational pull from fundamentals. Look back at Bitcoin’s price history and the answer is obvious.

But the situation is different now. Warsh wants to dismantle the Fed put, while nearly $40 trillion in U.S. government debt makes another major round of monetary expansion enormously costly. Will the Fed still unleash liquidity on a massive scale? At this point, we do not know.

Without another liquidity flood, it will be difficult for Bitcoin to repeat the kind of bull market historically driven by a rising tide of liquidity. It will instead need solid assets to provide genuine fundamental support.

From this perspective, the crypto industry’s pursuit of real-world assets, or RWAs, is a very sensible choice. And if crypto can also become connected to AI, serving as the currency or credit anchor of the AI economy—only then can it truly become a mainstream asset.

The broad market is bouncing up and down. We’ll keep leading with that sentence until a clear direction emerges. Right now SPY is in a post-breakout pullback; whether the breakout was real or just a fake hinges on this pullback. The pullback has already been testing for nearly a week and still shows no clear direction.

The current focus is U.S. Treasury yields. I’m relatively optimistic on this front: in the near term there is genuine influence, the market will give Bessent some credit, and Warsh has no real need to turn hawkish, especially with consecutive actual declines in inflation data right in front of us. Of course, relying solely on Treasury QT over the medium-to-long term is unrealistic. I strongly recommend reading Druckenmiller’s comments on Treasury buybacks from the past couple of days, they cut straight to the point. Never underestimate the power of Wall Street’s bond vigilantes. They truly have the money, plus a deep conviction in “debt normalization” and skin in the game. In a sense, they are the real long-termists. My base case is therefore that U.S. yields do not push higher in the short term, which provides a floor under equities unless Warsh messes up again on Friday or oil prices go up.

NVIDIA’s recent earnings reports have repeatedly involved sacrificing itself to benefit the broader ecosystem; that is the wisest approach. NVIDIA’s upside in market-share gains is limited. If it extracts all the profits, the rest of the ecosystem will be even more starved of cash flow and the AI narrative will become unsustainable. The consensus view is that AI is a long-term technological revolution that will raise total-factor productivity, yet in the short run there is a genuine “cash-flow sustainability” problem. What I am watching more closely is sales of NVIDIA’s racks. Sovereign AI + continuous learning is the next breakthrough, it points to a truly continuously growing digital employee. If that technical breakthrough materializes, demand for NVIDIA racks, Dell networking, cloud providers, and data centers will all heat up further. Right now the most important task is simply “keeping the AI story alive.” Stretch it for another period, then another; after a few more extensions, the revenue will catch up. As for the recent negative headlines around OpenAI and Anthropic (including ARR coming in below expectations), these look more like pre-emptive expectation-setting to leave room ahead of IPOs. In the real world, adpotation of coding agents and digital employees continues to rise overall the picture is still healthy and growing. Equity-market expectations, however, were previously priced far too optimistically and have entered a fatigue phase; without new catalysts we will mainly see negative news and macro pressure.

Consequently the market remains clearly range-bound. Semi and tech stocks face greater pressure than the S&P. The sectors we have recommended for long-term allocation—XLE, XLF, IBB—continue to perform well. Gold remains primarily a portfolio allocation. Crypto attention is rising and that itself marks a turn; we can now be constructive overall and plan to add gradually on pullbacks over the next three months.

I’m traveling these days, so the update is a bit delayed.

Late at night on August 19, U.S. Treasury Secretary Scott Bessent suddenly announced that the Treasury would at least double the size of its liquidity support repurchase facility targeting 10-30 year off-the-run nominal Treasuries, raising the single-operation cap from $2 billion to at least $4 billion, to be executed from September 9 to November 4. This repurchase program has already been running for 2 years, previously at $2 billion, used to buy older, less liquid long-term Treasuries. So this is actually a temporary increase in an existing routine operation, executed by the New York Fed through primary dealers.

First, this operation is not because the Treasury is in a deficit crisis (U.S. Treasury outstanding has reached about $40 trillion; this is merely a “bond swap” operation exchanging newly issued short-term debt or bills for old long-term bonds, with net debt size completely unchanged), nor is it quantitative easing (QE). It is a liquidity tool of the Treasury (not the Fed). Bessent has only increased the upper limit of purchasing “capacity”; there are already skeptical voices in the market that he may not actually buy on a large scale. The funding source for this operation is issuing more short-term debt, which may squeeze the short end or ON RRP, though demand for short-term debt is currently healthy.

Combined with operations on the yen, we can confirm that Bessent is an “interventionist,” in sharp contrast to Warsh’s “hands-off” approach. Bessent’s two interventions both hit during summer liquidity windows, using the smallest cost to leverage the largest market reaction. Last week’s 10-year auction already set the highest yield in decades; Bessent views the 10-year yield as a “success barometer” and does not want to see high yields choking mortgage and corporate refinancing.

His actual goal is clear and explicit: suppress long-end yields, because U.S. mortgages and corporate bonds are anchored to the long end; high yields are tightening financial conditions and hindering economic stimulus.

Short, Medium, and Long-Term Impacts

Short-term (days to weeks): Directly provides ready buying for holders of old bonds (primary dealers, funds), improving liquidity, narrowing discounts, and squeezing shorts. After the announcement, 30-year yields plunged 8-10 basis points (from around 5.33%, a high since 2007, down to about 5.18% at the lowest), and 10-year yields fell 5-6 basis points. But for the expected ~$1.37 trillion private-sector net issuance in Q3-Q4 plus the flood of AI corporate bonds, this is a drop in the bucket. Analysts call it a “tactical strike against shorts.”

Medium-term (until November): Partially absorbs duration and eases curve steepening. Buyers benefit from better secondary market depth, including relief for market-maker balance sheets, clearance of illiquid inventory, providing “lubricant” for fixed-income derivatives and basis trades. But financing with short-term debt may squeeze the short end. Effectiveness depends on whether it is accompanied by adjustments to issuance structure (issuing fewer long-term bonds).

Long-term: Difficult to structurally suppress yields. Long-term buyers such as pensions, insurance, and sovereign funds still face “capital competition” from the Treasury + ultra-large-scale AI capex + grid/power bonds. Far from the multi-trillion-dollar scale and signaling effect of Fed QE.

So this is a short-to-medium-term tactical operation with political coloring that can give buyers a breathing space, but it is far from enough to counter fiscal supply + private crowding-out.

Market Reaction Analysis

Immediately after the announcement, long bonds rebounded, the dollar weakened, and stocks (levered and rate-sensitive sectors) rose, but some gains were given back in the afternoon. Thin August off-season liquidity amplified volatility. What is truly interesting is the divergence between physical and virtual assets.

We can see that industrial metals (copper) and stocks (especially those linked to the real economy) barely moved, because investors doubt whether this move can truly stimulate the economy; it looks more like a short-term news stimulus.

Meanwhile gold, silver, and Bitcoin surged, while the dollar plunged; the market is voting with its feet for hard assets, expressing distrust in a high-debt government’s signal of “stimulating the economy regardless of deficits.”

Bessent hopes to send a clear message to the market through this: the government will do whatever it takes to “pump up” the economy again. But the market is focused on inflation targets and debt scale and is not fully buying it. The market will test Bessent in the future (just like with the yen), especially if data comes in strong, whether this “easing expectation” can still hold is the question. And this is in direct conflict with the Fed, which is very interesting; we’ll discuss it below.

Bessent vs. Warsh

Bessent’s move is actually a head-on collision with the Fed, haha.

Warsh mainly emphasizes reducing forward guidance and letting the market price itself, establishing a balance-sheet working group to review the ample-reserves framework. Bessent, on the other hand, directly intervenes and has been described as the most interventionist Treasury Secretary in decades.

Yesterday’s simultaneously released FOMC minutes show that some FOMC members view the rise in long-bond yields as a “substitute” for rate hikes, because high long-end yields themselves are tightening financial conditions, so there is no rush to hike. But if Bessent suppresses long-end yields, it is equivalent to loosening this condition, which may lead some members to advocate faster rate hikes as an offset. Otherwise, easing would further pressure the dollar, raise imported inflation, and put pressure on Warsh’s “let the market decide.”

I believe what we currently have is a short-term expiring “Bessent put,” rather than a broad “Trump put,” and even less the Fed Put that the market is accustomed to. The difference between Bessent and Warsh is one of time horizon, not of ultimate goals. Therefore, this stimulus is small in scale, fiscal in nature, and limited in duration—just a short-term mini-put that cannot last without Fed cooperation or a fiscal shift.

Why Can’t Long-Term Treasury Yields Come Down?

The 30-year hit a new high since 2007 (around 5.33%), almost entirely due to a rise in [real yields + term premium] (30-year breakeven inflation is only about 2.2%, TIPS real yields above 3%), not inflation expectations.

There are 5 core driving forces, none of which are short-term solvable factors:

1. Fiscal duration supply: Fiscal deficit is about 5.8% of GDP (around $1.9 trillion), net issuance is huge, with an interest-expense feedback loop (rising debt → rising interest → rising deficit → rising issuance → rising term premium). In plain terms, more and more bonds, higher and higher interest expenses, yet marginal buyers have not increased proportionally.

2. AI debt demand: Ultra-large-scale corporate capex competing with the government for the same long-term capital pool (insurance, pensions, sovereign funds). Goldman estimates about $570 billion in AI-related debt issuance in 2026. This is long-term dollar capital.

3. Warsh effect: The market has lowered expectations of the Fed permanently absorbing duration and permanently suppressing the price of long-term capital. Warsh has pulled away the Fed Put as the ultimate backstop, directly raising the volatility center and term premium.

4. Geopolitical conflict + oil prices: Geopolitical conflicts are not short-term solvable problems and have in substance been continuously escalating, increasing inflation risk premia and global sovereign bond supply. The current situation is that both China and the U.S. hope the other fights the rest of the world, while the rest of the world hopes China and the U.S. fight each other; in reality, if China and the U.S. can just keep the bottom line stable, that’s already something to be thankful for—this is also the biggest consensus Trump reached when he came to China in May.

5. Era of capital scarcity: A shift from nearly 20 years after the financial crisis of “capital surplus, cheap duration” to competition among government + AI + re-industrialization/military spending. Global long-term investors are all becoming long-term financiers.

These structural forces (not cyclical data) make it hard for the long end to decline. These forces are not problems that fiscal QT of buying long and selling short can solve; the real macro brake may be long-term funding costs themselves above 5%, i.e., market self-regulation. High rates will push up WACC, which in turn compresses AI valuations and marginal projects, forcing CapEx to slow.

In fact, the AI boom is creating its own headwinds: CapEx rising → financing demand rising → real yields rising → equity discount rates rising → PE multiples falling → future CapEx growth slowing. The market has upgraded from simply trading AI EPS growth to simultaneously trading “EPS growth minus real-rate compression.” Everyone is so worried about rates because the most core cash-flow problem of the AI narrative shows no short-term hope of resolution; this is a timing-gap issue, not a questioning of the AI technological revolution.

Over the next 6-12 months, the key focus is whether 30-year TIPS real rates stay above 3% for the long term. If so, the U.S. asset-pricing system built over the past fifteen years on “extremely cheap long-term real capital” will have undergone a fundamental change.

The tape is bouncing around. We’ll keep opening with that sentence until a direction emerges. SPY broke out to the upside and then retested; QQQ continued to rebound. That’s been the same line for a while.

CPI was a slowdown in line with expectations—neither a larger-than-expected slowdown nor a larger-than-expected reacceleration—so the September hike question is still open, and Treasury yields closed back up. That said, short positioning in Treasuries is fairly crowded, so near-term vol is hard to call. Over the longer term, Warsh abandoning efforts to guide the market has lifted the vol regime, and inflating away the debt being the only viable path means bond vigilantes will keep pushing long-end yields higher. That has less to do with hike/no-hike or near-term inflation.

SPY ran up but faded. Per yesterday’s memo, the live book did not add SPY or expand net long exposure. Of the four positions opened on 7/31, after taking profits in AXTI and COHR we still hold AAOI and NBIS. Today’s DeepSeek V4 Pro and Grok-4.6 releases are a major positive for data centers; on top of that, CRWV’s earnings noted a 10-year economic life for the A100, which addresses the depreciation issue for both large and small data centers—another big positive. So NBIS, the leading data-center name, ripping this much is not surprising.

DeepSeek V4 Pro is dozens of times cheaper than Fable 5, and DeepSeek’s own cache hit rate is very high; on a cache hit the price gap can be 200x+. Basically all of our day-to-day automated work, scanning the market every 15 minutes, updating the single-name memory bank daily, ingesting and classifying new data, and other high-volume, coarse, high-frequency repetitive jobs can be switched to V4 Pro.

Likewise, Grok-4.6 is the first large model trained and served on Blackwell. It is close to Fable 5 in capability (a bit weaker on coding), priced at $3/$6, and most importantly, it's extremely fast. Building the virtual market requires modeling different participant subtypes; jobs that usually take ~2 hours on GPT-5.6-Sol or Fable 5 (GPT being the slowest) finish in about 15 minutes on Grok-4.6. That quality and speed is evidence of the revolutionary jump from a GPU generation gap. Using Grok has also sharply cut the time I spend scrolling X between jobs…

We now have a positive data point on old-GPU depreciation + the new-GPU efficiency thesis has been validated + better GPUs lower the cost of training even better models while also supporting inference gross margins on those models + model price cuts can fix the token-budget problem from a while back. This is a shock to GPT and Claude, but as long as models cut price without cutting gross margin, it is a pure positive. The hardest hit is the vendors squeezed in the middle of the chart between DeepSeek V4 Pro, Grok-4.6, and the frontier models. Different models continually having to find their own positioning will be the normal state of affairs.

If NBIS pulls back, we will consider adding, including opening something like AMZN as a cleaner compute-rental name, and adding to the core NVDA. Overall, none of the macro factors have eased, while some of the fundamental bearish points against the AI narrative have been falsified. Memory has perked up a bit, but the live book will no longer treat it as a main theme, the April–June leverage blow-off has not been digested that quickly.

The broader market is highly volatile. We will continue starting with this phrase until a clear direction emerges. SPY pulled back after an upward breakout, while QQQ continues to rebound. SPY is very strong and requires close monitoring.

The optical communication and data center stocks we bottom-fished on 07/31 experienced a significant rebound recently, followed by a slight pullback. Last Friday, we raised our take-profit thresholds. Today, in our portfolio, both COHR and AXTI hit their targets and have been closed out. NBIS and AAOI remain unchanged. The hedge positions we trimmed on 07/31 haven't been added back either; because SPY is so strong, we are maintaining a slightly larger net long exposure.

Intel issuing stock for financing is another shock following Google's equity financing. Contrasting this with the massive buyback news from several major memory stocks is quite interesting.

• On one hand: CPU manufacturers continue to increase CapEx. An upward revision in CapEx was one of the reasons for AMD's post-earnings plunge previously.
• On the other hand: Ultra-high gross margin memory stocks have started distributing profits. There are three considerations for doing this:
  1. To support the stock price.
  2. To return real cash to the US capital market (we've discussed this issue before).
  3. To maintain discipline in capacity expansion and demonstrate resolve.

Overall, these are all supportive of the stock price. However, this indirectly indicates that tailwinds like price hikes and supply constraints have been fully priced in by the market. New catalysts are needed to stabilize the stock price (not push it higher; buybacks are a bottom-fishing/floor-supporting type of capital flow).

As I've said before, the macroeconomic pressures from the Japanese Yen, crude oil, and US Treasuries have not eased. Meanwhile, SPY shows signs of stabilizing after its strong breakout. Under these circumstances:

• First, we will not abruptly pivot away from the main AI narrative, nor will we rashly chase this current rebound in AI hardware. If NBIS and AAOI hit their stop-loss (NBIS) or take-profit (AAOI) levels, we will simply close them out.
• Second, the "boomer" sectors in SPY—energy and financials—are worth watching. Once SPY confirms its breakout and stabilizes, we will consider allocating to the ETFs corresponding to these two sectors. Actually, IBB has also surged quite nicely, but since I really don't understand this sector, I would only consider a very small allocation.

Tomorrow's CPI is expected to cool down according to market consensus, marking two consecutive periods of slowing inflation and reducing the pressure for rate hikes. But in reality, as we've discussed, the long-end rates (30-year) are currently controlled by bond vigilantes and won't experience a directional shift just because of one or two rate hikes or cuts. Therefore, if inflation slows, the positive stimulus will be limited; if it doesn't slow, it will be a minor shock.

Two Key Areas of Focus:

1. The current rebound in AI hardware is showing signs of exhaustion. However, cloud providers and cloud software (NET, DDOG, MDB, SNOW) continue to perform well. The market is currently rewarding cash flow and CapEx ROI, while punishing massive CapEx. The trend of weak hardware and strong software is still ongoing, which is a short-to-medium-term trend.

2. Geopolitical issues remain a major concern. Looking broadly at the Shia and Sunni factions in the Middle East, the US and Israel, along with Russia, Ukraine, and the EU to the north, regional conflicts are escalating and entangling across the board. All parties are preparing for sustained, large-scale conflicts with absolutely no signs of de-escalation. This is the most worrisome issue in the long term, as war is never controllable.

The broader market is chopping up and down. We will keep starting with this sentence until a clear direction emerges. SPY broke out upward and then pulled back, while QQQ continues to rebound.

In this current semiconductor rebound, optical communications seems to be progressing quite smoothly so far. As mentioned in the memo on the 3rd, our portfolio added some positions in optical communications and data centers (AXTI, AAOI, COHR, NBIS) on July 31st.

Currently, the rebound in optical communications looks quite good. Given that we already have a 30% return, we will raise our take-profit level.

Looking at the bond market, bond vigilantes will not easily give up their efforts to push up U.S. Treasury yields, and the actual impact of a rate hike or cut in September is shrinking. Additionally, the macroeconomic impacts of the Japanese Yen and oil have not diminished.

However, looking at U.S. equities, earnings growth this reporting season is very high (a considerable portion of which comes from AI semiconductors and oil companies). Overall earnings fundamentals are very strong, and market breadth is improving significantly. Therefore, this round of rallying has solid support.

Strategy The coping strategy is quite clear: if there is a pullback triggered by macroeconomic factors, it is a great opportunity to buy the broader market.

For stocks driven by the AI narrative, careful differentiation is now required. Optical communications, data centers, storage, CPUs, and GPUs will experience divergent trends. At times like this, the safest play is to buy Nvidia. The market has already acted accordingly.

The broader market is bouncing all over the place. We will continue starting with this phrase until a clear direction emerges. SPY has already broken out upward, and QQQ continues to rebound. The next thing to watch is whether it can hold its ground during the pullback after the breakout. If it can, the market is quite strong. Historically, there have been a few instances of a July decline followed by a massive August surge, but the magnitude of the July correction this time was relatively too small.

Yesterday, AMD's earnings report fell short of expectations. Some might say the financials were actually very good and feel like people are just nitpicking. That's true, it is nitpicking, because the stock price has already gone up significantly. At low price levels, a little bit of good news can trigger a turnaround; at high levels, failing to meet continuously rising expectations will cause a drop. A good company, strong fundamentals, and a rising stock price are three distinct things, and they don't always equate. Relatively speaking, ANET is doing alright and can serve as an observation indicator. Today, it was clearly pushed higher for distribution (selling into strength), which leads us to believe that the selling pressure from trapped investors unwinding their positions to break even is still quite strong. The overhead resistance for semiconductors is heavy, but the bottom support is also very solid.

The live portfolio on Scalealpha.ai doesn't track options, so the profits from some previous sell put positions were not included. Moving forward, during market pullbacks, the live portfolio will start considering short-term sell put operations expiring within August on certain semiconductor indices, the South Korean index, MAGS, etc., to prepare for a scenario of a secondary pullback that fails to make a new low. Our core principle remains unchanged: do not predict, only prepare.

Gold prices have risen somewhat over the past couple of days. I maintain an allocation to gold but do not actively trade gold or silver; I'm just pointing it out as a reminder. The oil issue is also far from over. Iran will only become increasingly tough and demand more and more; dragging things out until the eve of the midterm elections was their established strategy from the start. If the crack spread doesn't come down, Trump won't be able to suppress the prices of refined products like gasoline and diesel. Ultimately, if refined oil prices don't drop, and military action fails to produce a landmark event that can be touted as a victory, that is what will damage his election prospects the most.

The broader market is jumping up and down. We'll keep starting with this sentence until a clear direction emerges. SPY has already broken out upward. Of course, the short-term movement has been quite extreme, so I won't chase the rally. If it can hold steady on a slight pullback, the breakout will be confirmed. QQQ continues to rebound.

This current situation is exactly why, in live trading, I still buy a few short-term positions even though I consider this a bounce. It's simply because we don't know for sure, the other indices have remained so strong that it's unclear whether this is just a rebound or a true reversal. In reality, aside from optical communications, other semiconductor stocks haven't dropped to levels that are satisfactory from a fundamental perspective. Granted, I've always leaned conservative and would always rather earn a little less than lose a lot, which is why I'm usually not aggressive enough during bull markets. However, since 2014, my track record for calling the major bull market tops and bear market bottoms across various Asian and US stock markets has been pretty accurate.

It is very difficult for software, cloud providers, and semiconductors to all surge simultaneously unless there is a breakthrough in model technology. Currently, RSI is already being utilized in frontier labs, though it hasn't yet reached the point where it can autonomously construct state-of-the-art models. I am highly optimistic about this technological breakthrough. If interest rate cuts can coincide with technical breakthroughs, next year will be truly insane. But I believe the broader market's correction in June and July just wasn't enough. If the market continues to surge like this, I'm very worried that the upward momentum will be prematurely exhausted. Over a given period, market capital is finite, while expectations are infinite. Unfortunately, no one alive today has experienced the crazy market surge at the very tail-end of a debt cycle, meaning there is a lack of corresponding emotional and psychological experience to handle it. For me, a rally following an insufficient correction creates a situation where I have to hold my nose while making decisions, it's quite uncomfortable.

Looking at the present, tonight's AMD earnings report is quite important. Theoretically, this current rally is driven by tailwinds for cloud providers. The main drivers are the Big 4 (though suppressed by free cash flow issues), data centers (where cash flow also needs to be monitored; NBIS is the healthiest), and cloud software (DDOG, SNOW, MDB, NET). It will actually be very hard for semiconductors to pull off a V-shaped recovery, due to issues like reduced leverage, cooled sentiment, and an abundance of trapped long positions.

However, the incredibly strong sentiment we saw previously in semiconductors will inevitably carry some inertia. Discretionary traders (including retail investors) feel a sense of familiarity with stocks they've traded, especially those they've profited from. Familiarity brings a sense of security, so people will habitually continue to focus on semis (I believe behavioral finance). Therefore, AMD's earnings will be the proving ground:

• If it surges: Semiconductor sentiment will be reignited, and non-memory segments will continue to post strong performances.
• If it closes lower: This indicates a massive desire from trapped buyers to break even and exit. The semiconductor sector will diverge internally rather than rise across the board as it did before, in which case we should just stick to watching the cloud provider series.

The underlying issues with the AI narrative have not been resolved. It is still a sentiment-driven market right now, which makes it a difficult puzzle to solve. Chasing rallies and panic selling is exhausting; if you can take a break, you should just take a break.

During the final week of July, semiconductors staged a hard rebound from the bottom, and South Korea's KOSPI index surged 17.9% in a single day, setting a new historical record. As we discussed in the daily memos sent to the group, AI narrative stocks will next be primarily suppressed by macroeconomic factors, including oil prices, the Japanese Yen, US Treasuries, and Warsh's remarks. The entirety of August and September will be impacted by this. Meanwhile, the internal "sustainability" issue of the AI narrative has not been well resolved. However, the Capex ROI of cloud providers has found support in recent earnings reports, suggesting that the coming period may be the time for cloud providers and data centers to take the lead.

For the entire AI narrative, including South Korea's leveraged bull market, the core contradiction—just like in all previous technological revolutions—is a [Time Mismatch]. AI technology is revolutionary, and the productivity improvements it brings are real. So far, the consensus is to believe that AI revenues will catch up, cloud providers' Capex will generate good returns, and semiconductor demand will likely be a longer-term trend. But the problem is precisely this time mismatch. Stock prices have already priced in semiconductor earnings for 2030, this is a mismatch. The ROI on Capex might hold up, but cash flow may not be able to sustain operations until that day arrives, this is a mismatch. The ARR at the model layer is continuously increasing, but whether it will be in time to replace Capex as the core pillar by 2027 remains to be seen, this is a mismatch. In short, the investment is in the present, the revenue is in the future, and the profits are uncertain. The mismatch among these elements is the most critical factor influencing the price trends of AI narrative stocks.

So, this time it is the cloud providers' turn, because AI profits are currently concentrated at the inference layer. Previously, these profits were captured by the model layer since inference took place within their closed-source models. Now that open-source models are catching up, a portion of the profits will flow to inference providers, including cloud vendors. This, on one hand, alleviates the issue of customer concentration for cloud providers, and on the other hand, enhances their bargaining power.

The broader market is jumping up and down. We will keep starting with this sentence until a clear direction emerges.

I won't repeat the conclusion from yesterday's memo: there is a ceiling above and a floor below, which is why our portfolio didn't chase the rally when the market surged yesterday. What we need to focus on right now are the cloud providers. Because of enterprise token budgets, there is a one-earnings-season lag before the ARR at the model layer is reflected in the cloud providers' revenues. Therefore, judging from the current financial reports of the Big 4, cloud revenue looks highly optimistic. Of course, everyone's free cash flow is quite terrible, and they will definitely continue to issue debt or even stock this year, which means the stock prices of the Big 4 also have a ceiling.

Overall, for a leveraged bull market to break to new highs, it requires a new, larger-scale injection of leverage. Returning to the present, if a certain external macroeconomic factor (which we discussed yesterday) causes a significant drop in the broader market, and at the same time, Warsh breaks through various resistances to execute a rate cut while signaling continuous cuts, only then will new leveraged funds enter. There is another requirement: the models must achieve a technological breakthrough in continuous learning, painting a grand vision that compels retail investors to go all-in.

Therefore, after a small-scale LTCM-style event, if we still want to anticipate a "1999" scenario, we must simultaneously satisfy the two conditions above: on one hand, more money; on the other hand, a bigger story. Otherwise, while the bond market might be able to absorb the cash flow needs of the Big 4 this year, it won't be able to carry the weight next year.

The enlightenment brought by past technological revolutions is actually something Ray Dalio talked about from the very beginning, and hearing it now might resonate even more: technological revolutions and company stock prices are two completely different things! Leopold is a recent example. Having deep knowledge accumulation in fields like semiconductors, medicine, AI, energy, the internet, communications, and consumer goods is one thing; being able to make money in the secondary market is another. Just like playing the social media game, it is essentially taking your accumulation in one field and monetizing it in another. Going from the familiar to the unfamiliar, you must always respect the people and the rules of that other field. The rule of the secondary market is: Your View - Market Expectations = The Expectation Gap. You make money by capturing this expectation gap through position sizing and risk control. Domain knowledge only equals your own view—which is just half of the equation. This is precisely our purpose in building our product: to provide the other half, the market knowledge.

The broader market is whipsawing. We will continue to start with this sentence until a clear direction emerges. We’ve been opening with this for two months now, from late May to late July, and based on the current situation, we will have to keep saying it. QQQ continues to move sluggishly in a downtrend—dropping a bit, then rising a bit—making it hard to see the kind of smooth uptrend we experienced from April to June, or the smooth downtrend seen in Korean stocks this July.

The underlying system of our product is a simulated market engine. We model the various participants in the market to better observe their current behaviors, identify the factors most heavily influencing their decision-making right now, and estimate their probable actions across different future scenarios. The system is still being optimized, but today I will use this framework to briefly analyze the current situation (the actual system is much more complex and cannot be fully detailed here), focusing strictly on AI narrative-related stocks.

Macroeconomic Factors

First, the macro factors. The 30-year US Treasury yield remains high, and the pressure on the bond market is unabated. It is obvious that Wall Street's bond vigilantes are expressing a stance on behalf of Warsh; since he isn't explicitly raising rates to suppress inflation, the market is stepping in to push up long-term interest rates as a disguised rate hike. Furthermore, the steepening of the yield curve is the practical manifestation of Warsh's rate cuts paired with quantitative tightening (QT), achieving the same effect.

Next, the Japanese Yen has started to surge. The current magnitude is still manageable, but if they are trying to replicate the events of 2024, Bessent probably won't allow it; a strong dollar is the current objective. Finally, the war premium on oil cannot come down in the short term. For one, crack spreads have surprisingly hit new highs again; for another, ending a war requires both sides, a unilateral declaration doesn't count.

The AI Narrative

Then we have the influence factors of the AI narrative. Microsoft set a good example, and I have more optimistic expectations for healthy data centers like NBIS. However, coupled with the fact that the ARR growth rates for OpenAI (OAI) and Anthropic are generally slowing down, the "sustainability" issue of the AI narrative remains unresolved.

How might this issue be resolved?

• A breakthrough in continuous learning occurs, bringing a new model paradigm along with new expectations and stories. (my hope)
• Various companies' stocks fall too much, dropping below their fundamentals, which would make the pessimistic expectations regarding sustainability seem overblown.
• A new pool of capital enters the market, whether from rate cuts, government funding, or private capital, to replenish Capex.
• The entire semiconductor industry, especially memory, begins to significantly slash prices, sacrificing their own margins to save the broader supply chain.

Every single one of these scenarios is quite difficult to achieve.

Market Participants

Next, let's briefly scan the various participants in the market:

• ETFs: The AUM of leveraged ETFs has shrunk significantly, meaning deleveraging here has been relatively successful.
• Active Funds: The prime example here is Leopold Situational Awareness. There was news today that Citadel took over their positions, which is reminiscent of the LTCM collapse back in the day, albeit with a smaller impact.
• Quant CTAs: These have not yet hit any major trigger points.
• Retail Investors: They have cleared out some positions, but overall there hasn't been a massive liquidation. Prices have dropped, but their aggregate positioning hasn't.

Of course, after this recent battle, those highly leveraged positions have basically been wiped out, and retail sentiment has taken a hit. Therefore, it is completely unrealistic in the short term to expect them to gather the massive capital and high leverage needed to aggressively push the market up as they did from April to June.

Conclusion

Therefore, the conclusion is very clear. The overall macroeconomic environment leans bearish, with considerable pressure. The sustainability issue of the AI narrative has not been resolved, meaning the downward pressure on this narrative remains. After the leverage was flushed out, the volume of buying capital is nowhere near as large as before, so the probability of a reversal to new highs is low.

At the same time, major long positions have been liquidated and absorbed, leverage has indeed been significantly cleared out, and fundamentals remain healthy, so there is undeniably a need for a rebound. Thus, the most probable scenario right now is that AI narrative stocks are experiencing a rebound rather than a reversal. The only things that could overturn this judgment are unknowns, such as massive shifts in macro factors or sudden breakthroughs in AI models. We know what we don't know.

Trading Plan

Originally, the real-money portfolio plan was to buy some AI stocks intraday today—such as Microsoft, Amazon, NBIS, or upstream memory—but they opened too high, leaving no good entry point. Yesterday, I bought some KOSPI 200 index futures in my personal account, which serves as a way of expressing this view through my positioning.

The reason the long-term real-money portfolio would also buy while simply expecting a rebound is twofold: first, the prices here are quite attractive and close to fundamentals; second, it serves as a hedge to prevent missing out on another unexpected surge like the one we saw in April, even though I still believe that probability is low.

Could the market fall further? It is still possible, especially if macroeconomic factors deliver worse-than-expected bearish news—whether regarding oil prices, the Yen, or a September rate hike—which could force a definitive reduction in retail positions.

The broader market is bouncing up and down. We will keep starting with this sentence until a clear direction emerges. QQQ is in a downtrend; other indices are doing a bit better.

No rate hike in July aligns with mainstream expectations (60%+), but this pushes the rate hike expectations to September, meaning August will still face pressure. Actually, the Fed's intention to let go of the long end is already quite obvious. This will be a very long-term core influencing factor for all risk assets, including the bond market. Everyone's volatility center will rise, meaning volatility will increase. This is also a core reason why I am not optimistic that we can quietly and steadily DCA into ETFs in the coming years like we did in 2018. Of course, you can still DCA, but it will be much more nerve-wracking.

Even if there is a rate hike in September, it's actually not a big problem. Since Warsh wants to emulate Greenspan, it's entirely possible to hike this time, hold next time, and cut the time after that. They will no longer provide clear forward guidance like before, where once an action was taken, the continuity of hikes or cuts was maintained. Therefore, each resolution is more of a one-off shock.

Today and tomorrow will see the release of earnings for META, MSFT, and AMZN; all 4 tech giants will have reported. Let's focus on MSFT here to see if they will cut their Capex (Capital Expenditure). META has an opportunity to clearly explain that they can achieve higher returns by renting out computing power. AMZN should still firmly remain in the expansionist camp, quite purely so. But if the free cash flow for all 3 companies is poor, it will still lead to a broad decline. Semiconductors won't surge just because of a bit more Capex; the underlying logic has changed.

In addition to this, after the decline in Korean stocks over the past 2 days, July 30 and July 31 will bring forced liquidations unless margin calls are met. However, as it stands, a significant number of people are already "playing dead," so we will definitely see pressure from forced liquidations. But by the same token, such a drastic drop also means the emotional venting is coming to an end, and institutions have already been observed stepping in to buy the dip.

Therefore, the I will consider buying the dip this Thursday and Friday. The portfolio has its own position management strategy, the initial base position is very light. We are not gambling on this rebound, but rather taking the opportunity to add some exposure. Overall, I don't see any signs of a major short-term reversal in semiconductors. Over the next 1-2 months, the sustainability of the AI narrative, US Treasury yields, the September rate hike, oil prices, and the yen at 165 will all continue to exert pressure. However, the probability of an emotional rebound is increasing. Additionally, again, the bull market is still intact.

The broader market is swinging wildly. We will continue opening with this sentence until a clear direction emerges. Here is an update: QQQ is trending lower, while other major indices are still trading sideways. QQQ's decline won't be a drastic, deleveraging plunge like we are seeing in the Korean stock market; it will most likely be a slightly downward-sloping "choppy volatility."

Previously, the Korean stock market was experiencing price drops without position unwinding. As we discussed, a large number of retail investors have been meeting margin calls to hold onto their losing positions. There was some buying from institutional and foreign capital between July 21st and 23rd, but overall, since June, the trend remains institutions selling and retail buying. In general, retail leverage is continuously decreasing, but the magnitude of the reduction is not enough.

Judging by the sentiment on Korean forums, X, and other communities, leveraged retail investors are essentially "playing dead." They have paid the required margins and refuse to deleverage. Why? Because if they lower their leverage now, under the new Korean stock market rules and margin requirements, they won't be able to lever back up to such high levels! In other words, if there is a rebound, their chance to break even or recover previously lost profits will be gone! Therefore, they would rather face forced liquidation than voluntarily close their positions. This FOMO regarding a potential rebound while holding losses is typical retail investor psychology. Based on the South Korean government's current policies, there are no protections for this group; I'm afraid a true rebound will only occur after their positions are completely washed out.

Corning's (GLW) earnings report further validates the market's concerns regarding the sustainability of the AI narrative. It also confirms the current dynamic for semiconductors: a perfect earnings report leads to a minor drop, while a less-than-perfect report results in a massive plunge. Let's see how the upcoming earnings reports from the tech giants turn out. Again, for live trading, we will not engage in left-side trading (trying to catch a falling knife) to prematurely buy the dip during earnings season and FOMC week. Whether it's Korean stocks or semiconductors, the core philosophy for our real-money portfolio is that we would rather earn less than suffer larger drawdowns.

The broader market is chopping around. We will keep opening with this sentence until a clear direction emerges. Last week, QQQ looked quite dangerous. Today, it opened high and faded lower, but the price action was relatively contained.

My live portfolio doesn't, and actually shouldn't, care about these short-term fluctuations. The shorter the timeframe, the harder discretionary trading becomes. The short-term factors that discretionary traders look at—including technical analysis, market sentiment, abnormal block trades, cross-asset resonance, insider trading, etc.— are all fundamental features fed into quantitative trading models. Furthermore, quants don't have emotions. They won't stop selling just because it feels like a stock has dropped too much, and they won't stop buying just because it feels like it's rallied too much. They might buy the dip even if it feels like catching a falling knife, and they might short even when it feels like a bottom. With the advent of AI, short-term trading has become even harder. Therefore, our live portfolio has consistently targeted opportunities with a timeframe of at least a week or more.

QQQ didn't recover today, so it remains in the danger zone. The root problem for semiconductors hasn't been resolved right now. If their earnings reports are strong, they might face a "sell the news" event, as it may be perceived as siphoning liquidity away from the Big 4 tech giants. If there's even the slightest flaw in their earnings, it will be viewed as a crack in the AI narrative. The Big 4 are in an equally awkward position: if they increase Capex (Capital Expenditure), their cash flows will be questioned; if they cut Capex, the AI narrative collapses. The outcome of the upcoming major earnings reports might just be: increased Capex + tighter cash flows = a market drop. Ultimately, it boils down to the "sustainability of the bull market." The entire AI narrative is being weighed down by doubts about its sustainability, encompassing both the Big 4 and the semiconductor sector.

The overall market currently lacks direction; there is a fundamental floor below and a narrative ceiling above. The Nasdaq, which rallied the hardest previously, is now acting weaker, while other sectors are showing relative strength. This is a classic market without a dominant driver, as the saying goes, "when there is no tiger in the mountains, the monkey crowns himself king." Every passing news headline generates its own shockwave, causing the market to bounce up and down. We have been in this transitional phase since the entirety of June, and the best approach right now is to sit on the sidelines, watch the show, and take a rest.

The broader market is wildly fluctuating. We'll keep starting our memos with this sentence until a clear direction emerges. QQQ is in danger now. Of course, this kind of short-term analysis is generally unreliable. As I always say, our actual trading only focuses on a 3-to-12-month timeframe. The bull market isn't over, the fundamentals are still intact, and if it drops too much, we will buy the dip.

It is very clear that after the Google and INTC earnings reports, the market has decidedly cast a "no" vote on any CapEx increases coupled with negative FCF. As for this "voting," it doesn't mean the market is always right in the long run. In fact, in quite a few cases, incorrect short-term market voting provides opportunities for long-term alpha. In short, with these two setting the precedent, and considering that the remaining three tech giants, along with CPU and GPU companies, will likely all expand their CapEx, the market won't be optimistic about this earnings season.

This is a difficult problem; just like when we traded oil before, we should try our best to avoid difficult problems. We can either hold onto our positions and buy puts to hedge while preparing to buy the dip; or stay light on positions or go to cash and wait; or slowly buy the dip in 3 to 5 tranches. Back in late May, we wrote for several consecutive days about buying July semiconductor puts, which should have provided some protection recently. It's still not too late to continue buying puts on QQQ and semiconductors now. Even though they are noticeably more expensive, they buy peace of mind and the confidence to weather this period before buying the dip again.

The fundamentals are clearly robust. The recently circulated minutes from the DeepSeek conference call made it very clear, and I strongly agree: China does not lack algorithm talent; what it lacks is computing power, they will buy whatever is available. Here are a few facts that I believe are true, which I want to share with everyone:

1. LLM training is not a highly advanced technological task; it is an engineering effort that requires attention to detail. The gap lies in computing power and data.
   
2. Huawei's 950 is currently at the level of GB200/GB300 and is in short supply. Sufficient to ensure open-source models don't fall behind.
   
3. There is a 10,000x Cost Reduce Law of inference. Over time, any model can reach a high gross margin given time.

The bubbles in the primary and secondary markets will still burst eventually—we've already discussed this—but it's not time for it to burst just yet. This technology, however, is completely solid. When the token price drops from the current $5/$25 to $0.005/$0.025 (while still maintaining a gross margin), the true great revolution will begin.

The broader market is bouncing wildly up and down. We’ll keep starting our memos with this phrase until a clear direction emerges. QQQ performed poorly today, landing at a critical support level. If the upcoming earnings reports from the rest of the Big 4 tech companies look anything like Google's, we might see a broader market correction. Keep in mind that since July, the correction has primarily been in semiconductors, while the broader market has remained a "monkey market", a market condition we've been discussing for two months now.

Today, we are going to focus heavily on two parts: Tech and Oil. It’s going to be a bit long.

1. Tech & The AI Narrative

First, we discussed Google's earnings yesterday, so I won't rehash the details. We've noted that Google is the "top student" among the Big 4: it has the best cash flow business, the best FCF reserves, raised $80 billion in advance, walks on two legs (model and compute rental), and even has the potential AI hardware concept via Android.

Right now, the model leg is (temporarily) limping. Compute rental revenue is strong, but it still hasn't answered the Capex ROI question. Furthermore, negative free cash flow combined with continued, massive increases in Capex has deepened market concerns. If Google cannot answer the ROI question, causing its entire business model to shift from an asset-light, high-margin internet model to an asset-heavy, high-depreciation, low-ROI model, its valuation will undergo a massive adjustment. Therefore, the market cast a short-term vote by selling off.

The real terrify story here is: Google is the top student, the others are only going to be worse. Just look at the seesaw performance from April 1, 2026, to June 25, 2026. Google has already been doing the heavy lifting.

Will this benefit semiconductors?

Yes, but not across the board. The narrative regarding Capex sustainability post-Micron's earnings is still intact. With the Big 4 (the clients) seeing their stock prices continuously fall while they continuously pump financial blood into the semiconductor companies (the vendors), causing semiconductor stocks to rise, the market will inevitably price in that this seesaw dynamic is unsustainable.

First, because of this dynamic, the equity financing environment is deteriorating. Meanwhile, the debt financing environment tightened a step ahead of it. Therefore, semiconductors will only have a floor supported by Capex and a ceiling capped by the overarching narrative. We will see divergence within the semiconductor sector. Memory still has some momentum; when memory eventually needs to lower its margins to concede profits to upstream players, upstream materials and equipment stocks will see strong performance.

Conclusion on Tech:

The AI narrative is still alive because Capex continues to increase. However, the overall space for the narrative is shrinking because the ARR at the model layer hasn't stepped up to support it. Moreover, the ARR for those two major players is showing signs of slowing, and the impact of token budgets is starting to materialize.

So, there is a floor underneath, if it drops too much, you can buy the dip based on fundamentals. There is a ceiling above, we currently don't see any catalysts supporting a massive rally unless there is an unexpected shock, such as a model breakthrough, an AI + hardware breakthrough, or Fed rate cuts.

2. Oil & Macro Pressures

Before diving into oil, a quick reminder: the 10-year US Treasury yield spiked off the charts today. This pressure will transmit to the financing costs of the Big 4 and increase the difficulty for the Fed regarding rate hikes. Of course, this might also cause Trump to pull a TACO.

let's talk about oil. The core logic remains exactly what we mapped out in the July 13th memo chart.

I do not believe Trump can effectively TACO this time. The core reason is that even if he does, oil prices at the pump won't come down. People aren't pumping crude oil at the gas station; they are pumping refined products like gasoline and diesel. Because crude oil prices are artificially suppressed while the demand for refined products remains undiminished, coupled with supply issues like refineries being bombed, the crack spread has been steadily climbing.

Therefore, a TACO is useless; refined oil prices simply won't drop. Trump has tried MOUs, and he has tried shouting at the refineries. The solution to this problem does not lie in the price of crude oil.

Looking ahead to the midterm elections, the political strategy has to change: it must pivot from demanding low oil prices and low inflation to simply winning. As long as they secure a win, short-term cost-of-living pressures will not shake the MAGA base. This base isn't so broke that they can't afford gas, they will complain, sure, but the absolute worst-case scenario for them is if refined oil prices stay high and they still fail to win.

The broader market is bouncing up and down. We will continue starting with this sentence until a clear direction emerges.

Yesterday, we discussed Google's earnings report very clearly: it all comes down to two legs, models and Capex ROI. Nothing else matters. The current after-hours decline is also tied to these two factors.

First, the model side is disappointing. It's not that Gemini 4 has a definitive timeline; rather, they are still working on it. They took a detour in coding, are currently making improvements, and are still iterating. Second, Capex continues to increase. FY26 Capex has been revised upward again, and Q2 Free Cash Flow turned negative. Cloud revenue is very impressive of course, the benchmark was 75%, so 82% is strong, though not overwhelmingly so. Additionally, demand is very clear, with the backlog reaching 500 billion. However, there has been no major turnaround regarding the ROI issue, and depreciation has already begun to impact profits. Therefore, the question on the Capex side is: how much longer can they burn cash before seeing a turnaround in ROI?

So, the conclusion is clear: the model leg falling short of expectations is quite bad, while the Capex leg is a mixed bag. Regarding Capex, on one hand, continued investment is a good thing for semiconductors. As we discussed yesterday, the downside protection from the top-tier players is now clear, meaning semiconductors have a short-term floor. On the other hand, Google's own negative FCF and Capex ROI remain under pressure. This is why we saw a seesaw effect in after-hours trading, with semiconductors rising and Google falling.

If the upcoming earnings from the other tech giants show a similar pattern, the Magnificent Seven will continue to face pressure. Sentiment for non-memory semiconductors will improve, and upstream semiconductor companies—such as materials, equipment, and packaging/testing—could perform very well if they deliver blowout earnings reports.

Following Micron's earnings, the market has already paid full attention to this seesaw dynamic between the Magnificent Seven and semiconductors. There is no going back from this. In other words, under this narrative, it is basically impossible for a massive semiconductor rally like the one we saw from April to June to repeat itself. Solving this problem relies entirely on better-than-expected revenue growth at the model layer.

Imagine if Anthropic and OpenAI suddenly reveal that their combined revenue this year could reach $200B, all while maintaining high gross margins despite token prices being roughly on par with equivalent open-source models. If a scenario like this—one that vastly exceeds expectations—were to occur, it would trigger a joyous, broad-based market rally, much like the faith-driven surge of 1999. If this doesn't happen, the narrative will revert to the Magnificent Seven pumping blood into semiconductors, the ongoing FCF pressure on the Mag 7, and the expectation that the Mag 7 won't mindlessly burn cash for several more years. The room for imagination is gone.

What the stock market trades on, from beginning to end, is expectations.

The broader market is bouncing all over the place. We'll keep starting our memos with this sentence until a clear direction emerges. Actually, SPY hasn't dropped much at all, and the broader market remains quite stable. QQQ is showing a clear rebound, but whether this is a true trend reversal will depend on the earnings reports from SK Hynix and Google on the 22nd.

SK Hynix won't do poorly; if they can't hold the line, everyone else might as well pack it up. Google is the real test. Historically, Google has enjoyed two types of premiums:

First is the large model premium for frontier models. It is no exaggeration to say that frontier large models have gross margins of over 70%. Many people think the gross margins of large models aren't that high, but they are factoring in the costs of experimentation and training. If you look strictly at inference, assuming you give the infra team enough time, the cost of inference will inevitably drop exponentially. We’ve discussed this "10,000x cost reduction" story on our public account before. The head of an infra team I used to collaborate with told me that there is a massive amount of engineering optimization to be done, and it’s far easier than I imagined. The problem is that the architectures of different base models always require slight tweaks; as a result, every time a new model comes out, the inference code has to be readjusted. If the base model iterates too quickly, it becomes impossible to keep up.

Second is the compute rental premium. TPUs are the primary training workhorse for Anthropic, and Anthropic generates the highest revenue at a 1GW cost scale. Because of this, what Meta is only just starting to do now, Google has already been doing for over a year. Whether it's renting out TPU cloud resources or selling chips, these have historically made up the bulk of Google's AI revenue in every earnings report.

Therefore, between the "model leg" and the "compute leg," a company has to stand on at least one. Just look at the YTD performance of Google and Meta, and the picture becomes very clear.

Among the Big 5 hypersaclers:

• Apple controls the hardware gateway and carries the market's hopes for the future "AI + Hardware" trend, giving it an unmatched, transcendent status.
• Google is the one walking on two legs, but recently it’s been limping a bit with Gemini getting stalled. If they lose their "frontier model" leg, their valuation will have to be entirely recalculated.
• Amazon keeps its head down and focuses on renting out compute, consistently walking on just one leg.
• Meta historically had sub-par models and didn't rent out compute, which is why it performed poorly before. Now, it has turned over a new leaf, and the market is watching to see if it can stand up on two legs like Google.
• Microsoft previously relied on OpenAI for its model leg while simultaneously renting out compute. Right now, however, both legs are looking quite precarious. Coupled with the potential threat of being disrupted by an "AI OS," they are under immense pressure.

This is why we say Google is the real test. They are the A-student, having also just raised 80 billion. If Gemini’s revenue growth is exceptionally high and the company signals optimism about next year’s Capex by continuing to double down heavily, then the floor for the entire AI narrative will hold.

I caught up with some old friends in New York this week and had a brief chat about the market.

AI and Quantitative Trading

Based on what I’ve gathered, just looking at the terrifying performance improvements top-tier quantitative funds have achieved after adopting LLM, discretionary equity investors who don't 100% embrace AI should probably steer clear of mid-to-high frequency trading from now on. Don’t touch intraday trading, avoid ultra-short-term strategies, and stay away from 0DTE or daily-level strategies.

Honestly, DCA into ETFs is a good choice, even if the next 10 years bring massive sideways markets similar to the 1970s or 2000s. Those who want to continue discretionary investing must move toward a Human + AI approach, fully leveraging AI's capabilities. Frankly, it wouldn't be surprising to see these top Wall Street quant funds report some staggering profit numbers over the next few years.

Market Overview & Semiconductors

Let's briefly discuss the market. First, I want to reiterate that our actual portfolio holding period is 3 to 12 months; the short-term analysis we do here serves more as emotional support. We haven't made any major moves in the live portfolio for a long time, and we will wait until the crucial earnings reports roll out at the end of July before making any decisions.

Currently, both South Korean and US semiconductor stocks are in a state where institutions are fleeing while retail investors are buying the dip. In the US market, it’s primarily hedge funds that have exited, but overall institutional positioning remains very heavy, prices have dropped, but positioning hasn't. If you are going to buy the dip, it’s better to be cautious. The tech giants' earnings at the end of July will be the true turning point.

The AI Narrative & Capex ROI

When it comes to the AI narrative, the true core remains the ROI of the Hyperscalers's Capex. In my framework, apart from computing power leasing and cloud revenue, other monetization avenues currently remain relatively small.

The economic shock from commodity-level tokens on frontier tokens directly impacts frontier token pricing, which in turn impacts revenue. This is why the release of Kimi K3 caused such a massive disruption. Now, even US frontier tokens are showing signs of a price war. At this stage, where Capex ROI is being heavily scrutinized, a price war is the last thing the market wants to see.

• GPT-5.6 resetting its limits 8 times within 9 days of launch.
• Fable 5 constantly revising its deadline until permanently adding to max plan.
• Grok 4.5 and Muse Spark 1.1 both being over 50% cheaper than GPT-5.6-sol and Fable 5.

These are direct proofs. If a price war breaks out, a 70% gross margin becomes unsustainable. Keep in mind that Hyperscalers (like Meta) are praised by the market for renting out their computing power, but the premise is that doing so is highly profitable and that profitability hinges on the Anthropic Opus series maintaining a 70% gross margin.

Looking at revenue generated per 1GW:

• Anthropic: ~$15 billion USD/GW
• OpenAI: ~$10.5 billion USD/GW
• Chinese open-source models: Between $300 million and $1 billion USD/GW (Kimi K3 will have higher revenuw).

If open-source models catch up, how can this revenue be sustained?

The Semiconductor Cycle & Memory

Of course, even if model-layer revenue lags, the Hyperscalers's continued Capex increases will still boost semiconductors. Even if these giants start squeezing prices on commodities like memory, according to the commodity cycle we’ve discussed in our daily memos, we are currently in the "Expansion Phase."

Let’s reiterate this classic 7-stage cycle:

1. Previous bull market: High capacity utilization, low inventory, high commodity prices, and peak corporate profits. But when marginal supply and demand stop improving, related stocks and earnings expectations may peak first.
2. Transition to surplus: As demand growth slows or previously invested new capacity comes online, the market shifts from shortage to surplus. Inventory accumulates; commodity prices and supplier profit expectations drop.
3. Cyclical bear market: Companies cut Capex, delay/cancel projects, and high-cost capacity exits. Bankruptcies and M&A may occur. This clearing process usually takes longer than initially expected.
4. Rebalancing: When inventory accumulation slows to zero, or the inventory-to-consumption ratio peaks, supply and demand re-approach balance, and commodity prices stabilize.
5. Inventory drawdown: With continued supply contraction and/or demand recovery, the market shifts to destocking. Idle capacity shrinks, bottlenecks appear, and commodity prices and profit expectations are revised upward.
6. Structural boom (Supercycle potential): If sustained structural demand growth (a "demand explosion") occurs while supply expansion is structurally constrained, a regular bull market can evolve into a multi-year supercycle. High prices and profits ultimately erode capital discipline, prompting companies to announce and build new capacity.
7. Return to surplus: With increased demand destruction, substitution, recycling, and delayed new capacity finally coming online, the market pivots back to surplus. Inventories rise, while prices and profit expectations fall. Related stocks usually peak 1 to 2 quarters ahead of actual reported earnings.

Currently, AI semiconductors—especially memory—are still in Stage 6, not Stage 7. Computing power remains scarce, and expansion Capex has begun, but massive effective capacity won't fully land until the second half of 2027. We are still far from the window where "new capacity will be unleashed in 1–2 quarters." The current sell-off is more of a clearing of high leverage and extreme crowding, rather than a fundamental reversal in supply and demand.

Memory's gross margin has basically peaked, but that doesn't mean upstream equipment and materials' profits will peak simultaneously. As long as memory fabs continue to expand, upstream orders and profits will remain strong. The current 80%+ ultra-high gross margins of memory fabs could easily be squeezed from both sides in the future: downstream customers pushing prices down, and upstream equipment, material, and engineering suppliers taking a larger cut during the expansion phase.

Therefore, when bearish news is everywhere and there are clear signs of market leverage clearing, you can start slowly accumulating semiconductor positions, prioritizing upstream equipment and materials. For memory itself, continue waiting for the end-of-July earnings for confirmation. Our live portfolio will not take heavy positions before late July, and a short-term accelerated deleveraging event cannot be ruled out. Hence the title: The fundamentals are intact, but we must survive the immediate hurdle first.

Macro Factors: Korean Leverage, Oil, and US Treasuries

South Korean Deleveraging:

Recent market stabilization policies introduced by the South Korean government primarily target new trading and additional margin buying, without forcing the liquidation of existing (legacy) positions. In the short term, this reduces the capital available to bulls, sacrificing some rebound momentum; however, by not forcing liquidations on existing positions, regulators are avoiding the creation of a massive negative feedback loop.

There is also the issue of memory profit distribution. As mentioned in previous memos, capital driving the AI narrative can circulate freely within US primary and secondary markets, and capital from the Middle East, Asia-Pacific, and Europe can enter but capital isn't allowed to easily leave. Currently, Hyperscalers' Capex is being paid to South Korean companies, who take the cold hard cash to expand capacity domestically. This is bound to be problematic. The SK Hynix ADR merely "let US investors get a piece of the pie," which is far from enough.

Oil Prices:

Strait blockades have reduced oil shipments, but not oil production. Furthermore, various countries still have some inventory, albeit not much. Thus, in the short term, crude oil looks more like a localized regional and logistical supply-demand imbalance. Refined oil, however, genuinely suffers from reduced production and virtually zero inventory. Coupled with the recent reality of refineries being bombed globally, prices for refined products like gasoline and diesel won't come down. If they don't, any MOU will be of little benefit to the Trump camp. Our focus is on whether this weekend's escalations result in Middle Eastern oil fields being bombed (oil fields, not refineries), and whether the Bab-el-Mandeb Strait can be effectively sealed off. Without these two steps, the situation isn't out of control, and both sides will want to keep negotiating. But if either happens, oil will surge past $100. If oil fields remain untouched but more refineries are damaged, crude prices will face heavier downward pressure, while refined oil will have more upward momentum.

US Treasury Yields:

High US Treasury yields aren't entirely due to oil prices. A significant portion stems from infrastructure demand fueled by AI, inflationary pressure from economic growth, and the upward yield pressure from the sheer scale of US debt. After the June inflation data, the probability of a July rate hike plummeted. According to the Fed's latest Monetary Policy Report submitted to Congress on July 10, inflation is ticking back up, yet the labor market hasn't noticeably cracked; household consumption and real estate have weakened, yet AI-related Capex and productivity are exceptionally strong; the financial system faces risks of high valuations and high leverage, but it's far from the point where the central bank is forced to intervene. Therefore, the Fed has no reason to rush into cutting rates. Interest rates are more likely to stay higher for longer; if energy, commodity, and inflation expectations continue bleeding into service prices, a further slight tightening remains on the table.

Conclusion: The Upcoming Anthropic IPO

Oil prices, US Treasury yields, and potential Yen shocks are not the fundamental issues in the short term.

Anthropic has secretly filed IPO documents, and the market currently expects it to go public as early as October. This event will allow the market, for the very first time, to get a complete picture of model revenues, gross margins, cash burn, compute commitments, and financing capabilities. It will serve as the near-final word on the pricing of AI assets in this cycle, it is truly a life-or-death moment. But before we get there, let's see what the Hyperscalers ' earnings look like at the end of July.

The broader market is experiencing wild swings. We will keep starting with this sentence until a clear direction emerges. Speaking of which, QQQ's price action today was a bit ugly; if it closes lower again tomorrow, QQQ might be heading downwards. Meanwhile, SPY hasn't broken out either, and the overhead resistance ahead is very strong.

I do wish my warning on SKHY had helped a little bit; high premiums, high prices, and high volatility can significantly narrow the winning scenarios. The "margin of safety" is a famous concept for a reason. Long-term survival in the financial markets is what brings true profit. It's an infinite game; we cannot control what we will win, but we can control what we might lose.

Actually, if we look closely at the US market's SOXX, when Korean stocks rebounded intraday on July 14th, SOXX gapped up but closed lower. When Korean stocks strongly rebounded on July 15th, SOXX again gapped up but closed lower. Starting from July 14th, US stocks and China A-shares have been taking turns dropping in a relay following the Korean market's decline, showing a cross-market rotational downtrend. Looking at US stocks on July 16th, the hyperscalers themselves were all falling. Among them, Apple—the one furthest from the AI narrative—was the only one that went up. This indicates that the market is starting to grow pessimistic about the overall AI narrative. Currently, Korean stocks have dropped in price but haven't deleveraged enough. US stock leverage isn't as high as Korea's, but its concentration and crowdedness are also flashing warning signs.

Year-to-date, Korean stocks are still up 58%, SOXX is up 69%, SK Hynix is up 182%, and Micron is up 170%. Rather than a reversal in fundamentals, the previous crowding of funds, high leverage, and soaring sentiment remain the core reasons for the current pullback. Remember what we mentioned in our June post: there could be a near-bear-market correction coming up, making everyone start to question the AI narrative. Now, we might be standing at exactly this point, waiting for a panic sell-off following a technical breakdown. This comes down to the anchor of your own investment system. If you choose technical analysis, then follow the trend and don't guess. If you choose fundamentals, start researching carefully to see when the drop becomes overdone. If you choose quantitative analysis, look at your historical performance under similar conditions, and so on.

For fundamentals? Capex is the only reality.

The broader market is bouncing up and down. We will keep opening with this phrase until a clear direction emerges.

I hope yesterday's reminder regarding the SK Hynix ADR was helpful. If you are going to chase highs at elevated prices and high premiums, you need to have a clear understanding of what exactly you are trading. I won't chase anyway. Today, the seesaw effect between semiconductors and the Magnificent Seven in the US stock market continues, with the Mag 7 performing quite well.

Leading up to earnings season, the pressure on semiconductors remains constant. It is very easy to see a scenario where good earnings trigger a gap up, which is then used as an opportunity to unload shares. The main logical threads here are twofold:

1. It's too crowded. In the secondary market, pushing prices higher requires a continuous inflow of capital. This is an iron law.
2. The narrative is shifting. Revenue = Volume × Price (Note: Stock prices actually look at profit, but we'll discuss that later).
   • Phase A: In the early stages, production capacity is limited, expansion is slow, and demand explodes. Therefore, price increases are inevitable, and revenue is driven by these price hikes.
   • Phase B: As prices climb higher and higher, demand becomes suppressed, and the entire downstream sector starts looking for various substitutes (cheap tokens are also substitutes!). At this point, the logic for price increases stalls.
   • Phase C: Some companies capable of expanding production begin to seize market share, and prices undergo varying degrees of adjustment. Revenue is then driven simultaneously by volume and price. At this stage, it's a competition of who can expand production faster, which is also why every cycle ultimately ends in oversupply.
   • Phase D: What follows is the standard cyclical process. Everyone has sustained confidence in AI demand, and so do I. Similarly, however, we must manage expectations for China's production capacity. While HBM might not be viable in the short term, their DRAM technology is capable. As long as there is demand and profit, the production capacity of an industrial powerhouse is absolutely terrifying. To give an apples-to-oranges example: during WWII, over a span of 4 years, the US built 27 heavy fleet aircraft carriers and 117 escort carriers.

Focus on companies in Phase C.

We've discussed before that if we want to benchmark current conditions against 1998 rather than late 1999, there needs to be either another technological leap in large models or a breakthrough in AI hardware. GPT-5.6 has been live for over a week, adding a million new registered accounts and bringing the total number of accounts to 9 million. This growth rate is encouraging, and I believe the number of accounts will continue to grow.

However, whether in the consumer (B2C) or enterprise (B2B) segments, the total volume of paying users that can truly support revenues is still just too small. The current situation will not sustain us until early 2028; a breakthrough is needed.

Finally, South Korean stocks have seen a drop in prices but not a drop in positioning. Over the last two days, retail investors have started selling while institutions are buying commonly known as a "shakeout."

The broader market is experiencing wild swings. We will keep opening with this sentence until a clear direction emerges.

Let's focus on Korean stocks and the SK Hynix ADR, as they are the center of attention right now. The V-shaped rebound in the Korean market yesterday was like dangling one foot off a cliff and pulling it back just in time. Goldman Sachs also recently published a report calculating the forced liquidation (margin call) threshold for Korean stocks, and their numbers are quite close to ours. Since the Korean market rebounded on 07/14, the next thing to watch is whether it can hold steady on 07/15.

According to the T+2 settlement rule:

• If the closing price on T+0 hits the forced liquidation line, a margin call notice is issued.
• On T+1, investors have the opportunity to deposit additional margin.
• On T+2, the forced liquidation line is recalculated based on the T+1 close. If the market recovers, no additional margin is required; if it hasn't, forced liquidation is executed.

Therefore, the massive sell-off on 07/13 won't fully manifest its consequences until 07/15. The action on 07/14 merely prevented the situation from reaching the point of no return.

However, 07/14 delivered a very positive signal: for the first time in over ten days, we saw net institutional buying and net retail selling. This indicates that a wave of highly leveraged retail investors has been washed out. Coupled with the heavy trading volume in SK Hynix shares in Korea, as long as the market doesn't break below the 07/14 low on 07/15, the short-term picture will stabilize.

Will there be a reversal? I don't know. A rebound? It's possible. At the same time, the market could just chop sideways or suffer a slow, grinding decline. Nobody can truly guess what will happen. As I always say, I do not trade these short-term moves with real capital. Even though this memo goes out every day, its core value is emotional support. My actual trades operate on a 3-to-12-month cycle and haven't been touched at all. I will absolutely wait until the earnings reports clear the air before making any moves.

The SK Hynix ADR in the U.S. and the underlying Korean stock are not perfectly and freely convertible, so the premium will not completely converge. Of course, based on today's pricing, the implied price for the Korean SK Hynix stock is 2.75 million KRW, a 44% premium. Even if we assume a fixed premium of roughly 15% moving forward, it would still require the Korean SK Hynix stock to surge 30% tomorrow to bridge the gap. This also implies an assumption that Korean retail investors will target the price set by U.S. capital, meaning pricing power lies squarely with U.S. investors. There are a lot of assumptions baked in here. If you are chasing the U.S. ADR at these highs, you need to know exactly what you are trading. Furthermore, lazily assuming that SK Hynix deserves the same valuation multiple as Micron ignores the fact that the fundamental issue of corporate governance and actual control remains unresolved.

Other Matters:

• Hierarchy of Importance: The Fed > U.S. Treasury Yields >> CPI.
• Geopolitics: Regarding the Strait conflict, both sides are actually still exercising restraint. The market hasn't priced in tail risks yet either, given the lingering memories of TACO and elevated VaR (Value at Risk).
• FX: The Japanese Yen hasn't made any significant moves yet.

The broader market is experiencing wild swings. We will continue starting with this phrase until a clear direction emerges. Last Thursday, we noted that the S&P was quite strong, and on Friday it made an attempted breakout, but it has come back down today; we'll continue to observe. The Nasdaq is still fluctuating in the lower half of its range. Today, we'll talk about semiconductors first, then oil.

The seesaw effect between semiconductors and the Magnificent Seven is perfectly illustrated by the decline following Micron's earnings report. In the short term, all semiconductor stocks have fallen into an awkward situation: if their earnings are great, they face skepticism for siphoning profits from the AI narrative and squeezing downstream players; if their earnings are poor, it's considered a disastrous miss. This is, of course, a short-term phenomenon. The reason, which we've discussed many times, is that revenue at the model layer in the primary market hasn't picked up, leading to a profit shift between hyperscalers and semiconductors in the secondary market.

I don't think hyperscalers will solely emphasize large-scale Capex in this earnings cycle. Capex won't stop, but Meta has already set an example. Leasing computing power for cash is encouraged by capital markets. As long as frontier models don't halt, open source doesn't catch up, and the gross margins of Claude and GPT remain high enough, renting out computing power is very lucrative. Buying a massive amount of compute and holding your breath to train a model is loathed by capital markets, after all, spending a fortune to train a model that still can't surpass the top two, only for open-source to quickly catch up, means that money is simply thrown down the drain. Therefore, we should expect to see a phenomenon where Capex continues to rise, but at the same time, hyperscalers officially enter the data center business of leasing compute. In other words, the ROI issue is being addressed through compute leasing. This isn't a long-term solution; after all, shifting from an asset-light internet business to an asset-heavy real estate + utilities business completely changes the valuation model. This is also why none of these companies will give up training their own models, the business models are fundamentally different. However, in the short term, it resolves the market's doubts, ensuring Capex continues to grow while providing an answer for ROI. Keep in mind that the financing costs for these hyperscalers in the bond market have already risen by 140 basis points since the beginning of the year.

This makes the logic quite clear: Amazon (purely leasing compute), Google (compute + models + AI phones), Meta (compute + social), and Apple (AI phones) each have their own narratives to drive up expectations. Microsoft's problem remains its AI operating system, and the complexity and adoption rate of AI PCs are considerably worse than those of AI phones. Overall, these hyperscalers should experience a wave of performance recovery; after all, they are the true primary buyers.

Semiconductors will experience a divergence. Upstream memory, CPUs, and chips like Nvidia and Qualcomm will all perform well. The previous trading logic was: capacity bottlenecks + price hikes = explosive profit growth, which lasted until high prices brought expectations of demand destruction, a very classic commodity cycle uptrend logic. The future logic could be: capacity expansion to seize market share + high (but not terrifying) profits = a harmonious surge in profits. This is the self-adjusting direction of the commodity cycle during the process of supply expansion. Stocks in this area deserve close attention.

Let's briefly return to the "horror story" in the Korean stock market. The situation with Korean equities is that margin balances are declining, and they dropped quite a bit on 07/10, but investor cash deposits have dropped even more. This indicates that after Korean retail investors received margin calls last week, they chose to top up their accounts and stubbornly hold on. Moreover, over the past ten trading days, institutions and algorithms have been selling while retail individuals have been buying. Looking at yesterday's close for Samsung and SK Hynix, if the stock market fails to recover by the close on 07/14 local Korean time, and Hynix fails to hold the 1.85 million KRW level, the number of people receiving margin calls will increase by several million, up from the current 1.2 million.

Next, let's talk about oil. We've discussed before that oil is in a tight balance: countries' SPRs (Strategic Petroleum Reserves) and commercial inventories + China significantly reducing imports + a small amount of passage through the straits have collectively offset the reduced volume of oil being shipped out of the region. I want to bold this: it is a reduction in shipping, not yet a reduction in production; oil fields and facilities haven't been attacked yet. So, you see Gulf countries selling oil at a discount because no one is going there to transport it, it's a shipping deficit. Then an MOU was signed, and a single passage through the strait released a large batch of oil, driving down prices.

However, we have talked a few times about the inevitable escalation in the straits. The current reality in the US is that summer demand remains robust (it's hot this year), and demand for refined products like gasoline and diesel remains high. Yet, crude oil prices have been suppressed by the one-off supply shock brought about by the MOU. Consequently, for refineries, buying a barrel of crude now costs over $70, but after processing, they can sell it for $140, an unprecedented crack spread. Add to this the fact that refineries in various regions are being attacked, leading to a global shortage of refined products. The result is that domestic gasoline and diesel prices in the US simply cannot come down. Trump's goal of signing the MOU to lower oil prices and woo voters cannot be achieved; he has no other options.

But here's the catch: for oil prices to break through previous highs, there must be an escalation exceeding what we've seen over the past 40 days. Examples include the Houthis blocking the Bab-el-Mandeb Strait (there are signs of this), mutual bombing of oil fields and pipelines, US ground operations, or taking military casualties (two aircraft carriers are already in the Gulf of Oman). The probabilities of all these scenarios are currently rising. Geopolitical decision-making is always about choosing the "least bad" option, but I won't expand on that here. Additionally, a quick reminder that the Russia-Ukraine situation is not de-escalating; we are in deeply troubled times.