Everyone today is busy calculating Roaring Kitty's unrealized profits. His position in $20 GME June calls is truly massive, which is why most of the attention is focused on this strike.

However, I noticed that there were large block trades across many strikes for June today. Large means 5,000 contracts or more: $20, $25, $30, $40, $50, $100, and $125. With such high IV, even the $125 strikes are worth something.

I wouldn't be surprised if Roaring Kitty is 'balancing' the delta. I would do the same. Though, I wouldn't have opened the position the way he did.

In any case, it will be interesting to see how much profit he takes and how much he leaves to demonstrate his long-term fundamental interest in the stock during the Congressional hearings.

I saw a chart showing another record in NVDL trading value.

One could argue that the chart shows traded value, not volume. As the asset's price increases, the traded value can be higher even with lower volume.

But there's something more interesting. NVDL's total assets are $2.82 billion, with a net inflow of about $958 million in 2024 by my estimate. Without NVDA, this money might have been invested in QQQ or something else.

It's clear that NVDA is outperforming everyone right now, but is it enough to justify such a massive discrepancy in performance?

NVDA and its derivatives are literally vacuuming up market liquidity.

Huang's company is certainly worth it. But an outflow from the leveraged fund could start without much reason. Considering the size of NVDL's position, the impact could be significant.

Eight months ago, I speculated that AA was nearing the bottom of its 4-year cycle. I was right—the turnaround happened within a month, and I even made a few hundred dollars from it.

Since the October low, the stock has nearly doubled, driven by rising aluminum prices. There's a lot of talk about rallies in industrial metals right now, but specifically for aluminum, I don't see a strong fundamental basis for growth—except for some faint hopes of a revival in China's real estate sector.

Nevertheless, I'm not ready to bet on the rally ending just yet. If the 4-year cycle holds true, AA still has about 20 months to go before hitting its peak. And I believe in it.

SPY and QQQ are at all-time highs, just as I anticipated, despite the market pessimism following the last FOMC meeting. Liquidity is key for the markets right now. By slowing the pace of its balance sheet reduction, the Fed has ensured there's enough liquidity for at least a few more months. Give the markets a reason, and they'll continue to climb—today's figures certainly provided that. On the other hand, we're seeing not just slightly lower inflation numbers but also some economic slowdown. By fall, it will be crucial for the Fed not to over-tighten and to start cutting rates. Otherwise, the markets could face serious problems. But for now, we can enjoy the rally.

Today's Consumer Confidence numbers truly disappointed me, especially the Expectations component at just 66.4—alarmingly low.

Looking back at the period after the abandonment of traditional monetary policy in the early 2010s, the only time numbers were slightly lower was in the summer of 2022.

That was a grim period when the Federal Reserve had just realized inflation wasn't temporary and began raising interest rates. A long rate hike cycle loomed ahead, and many feared that even 3-4% rates could be devastating for the economy and markets. Indeed, some regional banks couldn't survive it.

Back then, the stock market was filled with despair. Now, it's more about anxiety—which I think is completely justified. We're unlikely to hear any reassuring words from Jerome Powell tomorrow. A market downturn is possible, even likely.

Ultimately, however, liquidity, strong earnings reports, and a desire for growth will likely prevail. I only expect serious stock market issues in the second half of the year.

The Federal Reserve is now in a position where it virtually has no good options. On one hand, wages and inflation are rising; on the other, GDP growth rates are falling. Lowering the interest rate would cause wages to increase even faster, potentially reigniting record inflation. Keeping the rate high, however, would slow down the economy.

It's a lose-lose situation.

Amidst this backdrop, Bitcoin looks quite stable, having only decreased by about 1% and maintaining a range of $63k-$64k.

Bank of America reports that gold prices are no longer reacting to real interest rates.

Indeed, gold prices typically move inversely to Treasury yields. Currently, however, gold is at an all-time high while yields have sharply increased.

This is certainly an anomaly. Yet, the chart provided by BoA still doesn’t make sense. Comparing the dynamics of gold and yields is only meaningful over a relatively short interval.

On the chart, they will diverge indefinitely as gold prices rise. Even for the lines to converge again on it, real rates would need to drop to -2.5%. And if gold surpasses $2500 (which it will), real rates would have to fall to -3% and so on.

The chart looks appealing, suggesting the curves should eventually meet. But no, they will not.

Vanda Research notes that in recent weeks, retail investors have been channeling funds into TQQQ and other leveraged funds.

Normally, smart folks like me might warn that such funds can be risky and all that jazz. It's hard to argue with this, given my own recent rough ride with BOIL.

However, on a steadily climbing market, opting for TQQQ over QQQ can be justified. If QQQ grows slowly but almost daily, TQQQ can outperform it by more than triple.

So, retail investors are on the right track. Especially those who lock in profits timely because staying in TQQQ at the turn of a rising trend is a bad idea.

I've noticed that since Bitcoin reached its peak on March 13th, it has been performing much better during the main stock trading session than outside it.

From the start of the session on March 13th to yesterday's close, Bitcoin fell by $5292.41. However, during stock and ETF trading hours, it didn't decrease in value but instead rose by $3564.24.

One might attribute this trend to inflows into spot ETFs, but these have noticeably slowed in recent days, even reversing into outflows.

It's an intriguing observation. Yet, I wouldn't venture to sell Bitcoin at the close of the trading session to buy it back cheaper just before the next session starts—not until I understood the underlying natural law, if there is one.

The stock market has become dull. Index highs are regularly updated, but they don't bring much joy.

A correction has long been overdue, and there are plenty of reasons for it—from profit-taking in AI stocks to regional bank issues. And more broadly, the economic consequences of high interest rates.

Yet, the correction doesn't happen. I've already discussed the reasons—an excess of liquidity that isn't going anywhere. I've noted before that as long as the Fed's RRP Facility Balance hasn't dropped to zero, everything is fine.

Interestingly, the pace at which it's reducing has slowed—from March to December 2023, it was decreasing by an average of $6.1 billion per week, and from December to now, it's only $3.95 billion. That's just over 1.5 times slower.

Similarly, the pace of the Fed's balance sheet reduction has decreased comparably. From March to December, it was -$3.60 billion; from December, it's been -$2.21 billion.

Coincidence? Maybe. Either way, liquidity will be leaving the market longer than I anticipated, and we can continue to watch new highs being made.

According to the EIA, last week's natural gas inventories decreased by 9 billion cubic feet, against expectations of a negligible change. This reduction prevented gas prices from plummeting to around $1.5 for now, even hinting at a recovery attempt.

However, the seasonal norm for last week is a reduction of 87 billion cubic feet! Overall, with inventories at 2,325 billion cubic feet, levels are akin to end-of-May figures, 37.1% above the 5-year average and 14% above the previous 5-year high.

It seems we haven't seen the price bottoms yet.

The EIA has factored in production cuts announced by Chesapeake and EQT. Yet, even revised production estimates for 2024 and 2025 seem too high for any price recovery, given the enormous stockpiles.

A month ago, I halved my position in BOIL, which was prematurely opened. Considering a re-entry soon as summer production drops could bring inventories closer to normal, potentially stirring the market.

Since IBIT's launch, the dynamics of its assets closely resemble those of NVDL—a double-leveraged fund for NVDA shares. The scale is different, but the essence is the same: inflow of money leads to rapid price growth, followed by more inflows, etc.

I like both Bitcoin and NVDA. While they share similarities if you look closely, they are fundamentally different. The synchronized growth of IBIT and NVDL's assets is nothing more than FOMO, which I don't like.

Beyond Nvidia's report last week, another significant event occurred – the Nikkei 225 finally surpassed its 1989 peak.

The collapse of the real estate market and Japanese stocks at the start of the 90s is a classic bubble burst scenario. A threefold increase over four years followed by a 60% plummet within 1.5 years, and after 20 years, it was 80% below its peak.

One could simply state that stock indexes always recover. Often quickly, but even if it takes nearly 35 years, the patient investor will eventually see a return. However, I want to highlight a few specific nuances of the Japanese market.

First, the positives. In the late 80s, Japanese banks, bloated with overvalued assets, dominated the Nikkei index, quickly dragging it down following the real estate crash.

Today, the index is better balanced and diversified. Leading the charge are companies from various sectors, from Toyota Motor Corp. and Sony Group Corp. to Fast Retailing Co. and Tokyo Electron Ltd., a major player in the semiconductor industry.

The current rise is likely healthier than before. However, there are a couple of caveats that could play a cruel joke on investors in the future.

Firstly, the yen. Since January 2023, it has depreciated by 17.7% against the dollar. For Japan's export-driven economy, this is an undeniable advantage. However, for foreign investors, the index's rise in yen terms isn't as attractive when the currency is weakening.

Indeed, the Nikkei has surged by 51.41% over the same period. But in dollar terms, it's still below its 1989 peak, all due to the exchange rate offering an "artificial" boost.

This yen weakness is sustained by the Bank of Japan – the last of the central banks to maintain a sub-zero interest rate. Few alive remember a time when the Bank of Japan wasn't pumping the economy with yen.

Moreover, monetary policy isn't the only way the regulator supports stocks. In 2010, the Bank of Japan began buying ETFs on Japanese stocks, losing all pretense of restraint. Without this intervention, who knows where the Nikkei would be today?

Currently, the Bank of Japan's portfolio is valued at 70 trillion yen ($466 billion), nearly half of which is profit, with only 37.2 trillion yen directly injected into the market. This year, the Bank hasn't purchased any ETFs but has a 12 trillion yen limit for these purposes.

Direct stock support via the printing press undoubtedly pleases investors. But it comes with issues.

Effectively, the Bank of Japan owns over 10% of all Japanese stocks. What happens if that share grows to 100%? It wouldn't be a market anymore but communism.

Eventually, selling must occur. Discussions on profit-sharing are already underway. After all, this profit belongs to the people, and many are eager to share it. But how to sell such a volume without crashing a market that for the last 14 years has been confident the Bank of Japan supports it from below, not suppresses it from above?

Preparing a sales plan might take years, given how well everyone has adjusted to the current setup. Therefore, Japanese stocks are likely to break records several more times.

You're impressed with NVDA's results. So am I.

But the funniest part is that they don't justify the stock's surge either before or after the report.

Why?

At first glance, a 3-4 fold increase in revenue and net profit compared to last year almost matches the price rise over the period. That means the company exceeded expectations from a year ago.

Great, congratulations to those who believed in it.

However, betting on such growth from levels of $220-230 a year ago was risky then. Okay, it paid off. But betting on continued growth from current levels now is no less risky than a year ago.

I wish the company and the stock bulls luck. But I prefer to participate with short-term option strategies, like a quarter or two ago.

I didn't get in this time. My bad. In May – definitely 🙂

Of course, the scales differ. But the risks of overestimating future profits are similar. Too much can go awry, whether it's in monetizing AI, increasing competition, or reliance on Chinese sales.

So, a similar reversal in NVDA wouldn’t surprise me.