The Semis Are in a Bubble That Is Going to Pop and Destroy Everything

I’d first like to preface this screed with the fact that I own $NVDA from years ago in the trusts for my children and have some presently in my quant. But let’s get serious about this fucking semiconductor index, shall we?

Returns for $SMH by month
Nov (23) +15.3%
Dec (23) +8.9%
Jan +6.3%
Feb +14%
March +6.1%
April down 4.8%
May +12.3%
June +8.4%
July +7.1%

Are you fucking kidding me?

Now let’s look at this silly thing called ‘valuation’. Some of you younger piece of shits have never heard of this word before because your fucking Reddit and Discord chats only buy stuff based upon astrological patterns or the whimsies of your gurus. But let’s take a look anyhow.

Below are the price to sales values of one of the major semi industries. If you peer in you can see the median p/s is about 6.8x now, the HIGHEST on RECOURD. More than that, if you look at the juxtaposition of it against the overall market by that stat on the far right you will now learn it is trading at a +448% premium to it. Now we can compare apples to apples across the decades and see if we ever traded like this before and the answer is NO. That’s about 3.6 standard deviations above normal. Again, NO BIG DEAL.

Now I know what you’re thinking because plebians always thinks this way: “but Fly what about AI and Bitcoin? How about that pal?”

SHUT THE FUCK UP. Remember back in 2021 when $ZM and all of those COVID plays traded at absurd valuations and you thought it would last forever? Well it didn’t and as much as I like $NVDA and all of the other supporting actors in this bubble; it’s going to fucking crash through the floorboards one day and suck the entire god damned market with it.

But don’t worry. It isn’t happening now, so you can go back your Discord server and figure out where the next play is, as I chew on my sour grapes.

Another day having the slightest idea what I was doing out there. My stratagem was to basically chase stuff, sell things going down; pray to God it all worked out. In the end, I was sent straight to hell to contemplate my sin, off by 69bps for the session.

There are markets when I cannot lose and then there’s this, an apparent albatross around my neck, strangling me lower into the black to become entangled by Octopi. It’s all very pedestrian and normal, just a guy out here telling you how my day went, an average Joe. I’m a very ordinary and plain person just trying to grow my investment account but the mean markets are stopping me from achieving some of my goals.

Back in my static accounts, I made some money and they just sort of did the exact opposite of my trading, me fumbling over myself into and out from Electric Truck scams and late day gambits into both fear and greed. Very normal Joe stuff.

I realize many of you reading this have heavily matted beards on your faces and sit always at record highs and my mediocrity might annoy you a little. But as children we are taught to have empathy and patience and I am asking that from you now, you and your fucking greasy and disgusting beards.

Into tomorrow, I have lots of longs with a $TZA hedge, because why the fuck not. Somehow I’ll end up losing on bot my longs and shorts. Month to date, I am down about a percent, so it’s nothing too serious, just an ordinary, fly in the woodpile, standard day.

It’s all so tiresome. Another trading day and another look into the abyss of an endless morass of mediocrity in my trading. I have been rangebound from down 30bps to up 45bps, right now at session lows. I thought I’d get cute and test $NKLA at session highs for a continuation, went for a cup of coffee, and returned to losses nearing 5% on the “trade.”

The impetus for that trade was pure, unbridled, greed. My reward was to get sockdologed right into my clean shaven face.

The main thrust of today’s bullish action is in names like $GS, $MS, $BAC, $TSLA,$BIDU, $BABA, you know shit that just runs higher out of nowhere. It’s like playing a game of whack a mole, especially for me. I stand before you all right now as a rank amateur, novice investor, attempting to trade the markets without a single idea in my head. I thought when I shaved my beard I’d regain a semblance, perhaps a morsel, of my former self. But no, just more of the same run of the mill mediocrity. Nothing to see here.

Hey at least my longer term accounts are doing well, the stuff I don’t touch and just leave be. If you stand in the middle of the street for long enough, eventually a fucking truck is going to run you over.

I’m not sure why men grow beards in the summer. I sort get a winter beard, men larping around like fucking lumberjacks wearing flannel shirts and pretending to be rugged whilst sipping on their chestnut lattes. But a beard in the summer should be illegal. You should be arrested and forced to shave it off in shame in front of the youth, to set an example.

You can’t just go walking around eating food into this face full of hair, getting grease all over it. Some of you fuckers even place oils on it, because you’re filthy animals and need something to take away the itch. Pro tip: if your face itches, that’s God’s way of telling you to SHAVE OFF THE FUCKING BEARD.

If you think about it, by defying God you might go to hell for a fashion statement. Also, women don’t like beards you fucking idiots and it doesn’t make you look tougher. Some men think they’re more imposing with this mass of hair on their face but it just makes them look like disgusting filth, particularly in the summer.

Get some barbasol shaving cream and have a nice clean shave with a safety razor and then apply some aftershave and then go kiss your wives. She’s thank you for it and you can thank me later you pigs.

I had a little self reflectance after the last blog with me whining about the tape being poor. Me being +12.5% for the year with the NASDAQ +20% has my dick feeling awfully small these days. Because of this, I am looking around for excuses for being such a pathetic loser. If I wasn’t a loser, I’d prove otherwise. Util my gains beat out the NASDAQ, I will shut the fuck up.

So what am I doing to fix things? Nothing much. I am all in long, even with very large $FNGU and $TNA positions, an act of depravity just 1 week from saying I would aim to narrow my daily fluctuations. But it is July and I ought to at least attempt at regaining whatever semblance of greatness is left inside me. It might just be over and if so I should be ok with that. Great ball players stop being great at some point and even though I was ever recognized by the masses as a “great trader”, I know through my own returns and consistency that I was.

Nothing could be more pathetic than seeing a former great person denigrate himself into the amber of mediocrity, so I’ll have to keep an objective eye on myself and make sure to stop making fucking excuses for being bad.

In my head, even as I write this, I am coping with facts such “but you’re not a loser Fly, you’re up 12.5% in 2024.” SHUT THE FUCK UP WEAK FLY. You are not here to underperform and if this is to be your new life as an average guy writing an average blog complaining about whites being replaced all over the world, you ought to just call it a wrap and fuck off into the woods and smoke your estate pipe whilst nibbling on nuts and barely until you drop dead of boredom.

I know this is going to sound like sour grapes, but let me preface this by saying I’m not a bear and not down for the year. But the overall look and scope of this market in 2024 isn’t exactly great. Sure there are frantic areas in the AI, database, and semi space; but all of those are related and if you’ve been reticent to chase $NVDA you missed out.

Below is the algorithmic value of all stocks rated by Stocklabs. The grading system is from 0 to 5 (best). You can clearly see the median score has been dropping all year.

The NASDAQ is +20% YTD, so how could this be? How about this for a stat. If you took all of the stocks in the market today, over 5000 over them, the market is DOWN 4.5% in 2024. This sort of jibes with the fact the $IWM, the small cap index, is flat for the year at a time when $META and $NVDA and $GOOGL are hitting fresh highs.

Again, the reason for this is simple: the big winners have already been selected. Everyone else is simply trying to pick up the scraps. If you’re invested amidst the scraps, you’ll find yourselves frustrated by the lack of progress at a time where all of the big capped stuff  trades up.

A day like today is especially tricky because the $IWM is besting the $QQQ, which might cause many of you retarded apes to hypo fixate on the “next winners.” But the most probable outcome is the path we’ve been on, with disappointment in anything but the largest companies in the world.

Tricks upon tricks are being laid out bare for me today, as I was caught long some $SOXS into an incredible rally in the semis. It’s sort of an outlier since SAAS and other software names in big capped tech are weak. As a point in fact, breadth for stocks over $100b in cap stands at just 44% today, whilst the smaller capped stuff is up sharply with breath of 70%.

I’ll try not to microanalyze it because all of those leads to me just wanting to be bearish, looking for excuses to hate the market. The fact is, at the open of trade breadth was 75% up and now its just 61%. This isn’t inherently bearish, but just a stated fact. Gains are concentrated in previously weak biotech and semis, with decent all around action in lower beta stocks. In other words, a well rounded portfolio might be up a little today. My Quant is actually +101bps due to being overweight semis. My longer term account is +20bps and my trading is down 97bps, mainly because I’m retarded.

I had good stocks at the open: $ADBE $SPOT $TSLA $CRWD $PYPL $TTD $COST $ISRG $TGT, but that wasn’t the move. That was last week’s move. This week’s move, so far, are a bunch of shit stocks and I was supposed to know that because I am psychic.

Anyway, I am now 65% cash, long and short a few things but really low beta. I am not going to let this cunt of a tape rout me so the best course of action is to wade through it until it becomes clearer to me.

Consider the following scenario to appreciate how bad 2022 was.

In 2019 the markets ran higher, as the Trump economy really churned out gains. The Nasdaq jumped by 38% that year. And then COVID hit in 2020 and it appeared all was lost. We endured perhaps the worst crash since the financial crisis of 2008 and stacked up record single day losses for the Dow.

At the lows in March of 2020, the NASDAQ was down by 30%. And then we turned around due to record stimulus, causing a frantic panic to the upside causing the NASDAQ to close +47% for the year, or +88% from the lows. I had gains in excess of 300% in 2020.

Then we continued higher again in 2021, rising another 26%. I produced returns of +218%.

And then the Russian war hit, coinciding with runaway inflation and we collapsed by 32%. The psychological damage of drawing down 32% just two years from the calamitous 2020 COVID crash ruined many people. I know of several people who lost more than half of their liquid net worths and really have never recovered since then. If you’re wondering, I netted +61% in 2022.

2023 was supposed to be a continuation of 2022 but we all of a sudden surged, as the Russian war proved to be benign for us and inflation abated. Led by $NVDA, we closed +54% in 2023. I netted +55% last year.

And here we are today, +21% for the year, comfy and just waiting for MOAR. We have gone though the worst and feel entitled to more returns. After all, we can’t crash again. We have crashed too often and deserve better. But in the event that we did start to trade lower, I’d like to remind you that memories are still very strong and the time wasn’t too long ago when people lost everything in speculating, which is why the market is extra volatile during periods of uncertainty.

This isn’t a warning of doom to come, but just a reminder that we are enjoying the best of times, which is atypical for markets as they usually like to meander higher and then lower before ultimately setting new highs.

I try to avoid writing about politics on the site these days, since I relegate that to my X account. Here I prefer to just discuss markets and I know that’s not what resonates anymore, because everything is politics these days. You can’t buy a cup of coffee these days without encountering some form of politics. It’s everywhere and it sucks. Part of me wants to be insular and just pretend like the country around me isn’t falling apart, that the birth rate isn’t collapsing, and trannies aren’t reading their fucking books inside pre schools anymore. I was programmed to be accepting to “all colors and creeds” and to only accept racism if directed at white men, particularly straight white men. There was a very specific brand of propaganda in the 1990s, which really went after Christmas trees, Christianity and weaponized black Americans to all of a sudden get really upset again over slavery, something that barely 3% of existing Americans had anything to do with.

I had to accept all of these things, because victimhood and people’s feelings were hurt. I remember taking a college course on the topic of communism and capitalism and felt, for the first time in my life, infuriated by politics when the female professor tried to explain to me that “white men can never be a victim of racism, because they hold the power.” These are games with words and it’s pedantic now. But some of you retarded apes still buy into this sort of garbage and believe that a group of people “must pay” for the sins of their forefather, or in this case for an entire race of people. Umm, no and fuck you.

I think it’s pretty clear what is happening in America and the subversion is 100% malicious. You may not want to believe it, mostly because you’re a good person and do not think evil, but they want to create a country where white people are a minority and then they will really fuck you over and for good. Look at how they treat you while you’re still 60% of the populous. Once that number gets to 30%, they’re literally going to hunt your great grandchildren down for the gold inside of their fucking heads.

So you can ignore politics and pretend all is well, especially since markets are at recourd highs and your neighborhoods are very nice, lawns trimmed perfectly, hedges maintained with precision. But in about 50 years America will be a hell hole and I know this for a fact, me having a time machine and all.

So what can we regular folk do about it? For one, we can stop pretending Trump is any good. I get why you might believe he’ll save us all in 2025, because you yearn for a hero, someone, anyone, who will represent you and your interests. But he was not able to do anything in 2020, save help speed up a death vaccine and increase censorship online and have all of his supporters tossed into prisons, no wall whatsoever.

I hear a lot of people say that “he’s the better of two evils” and to that I say “why will you participate in a choice between two evils?” If Joe the Cadaver gets in again, it’ll be the laughing stock of the world and everyone will see it for the farce it is. The dissident right will grow in numbers and strength to maybe produce actual change in 2028. Truthfully, I really don’t think the issue has to do with personnel, but with the form of government we have. Democracy is old and corrupted beyond recognition and will always degrade itself into wanton degeneracy. In other words, the democratic process has been hacked to serve certain interests, totally ignoring the will of the people.

Back to the economics of all this, it’s important to understand the Fed is completely in control of your money supply and can decide whenever they want to break your economy. Think about that for a second. Because they have debased the currency and flooded your country with so many people, everything produced here costs more. You might be able to buy electronics and textiles at affordable prices, due to it being made overseas, but try taking a look at home, college, insurance, healthcare, food prices these days. Those spikes in prices aren’t by accident. It is the direct result of too many people chasing too few services. Couple that with the fact they just gave away $5 trillion during the COVID lockdowns and now we have inflation on top of an already debased currency. When I say “debased” I mean its actual buying power, not a forex cross against another piece of shit fiat currency. How much can your dollar buy today vs 1980?

With all that in mind, I don’t see any reason to get worked up over this version of Trump. From what I have heard from him, nothing is remotely right wing enough to warrant my efforts and he’s surrounded by GOP hacks, catering to people like Nikki Haley and Gay Graham. The Republican Party is a greater threat to America than the Democrats, because we know the Democrats are rotten to their core but the Republicans pretend to be patriots and just gatekeep the right from actually changing the country away from forever wars and forever migration and forever fuck you to the people who built this civilization.

What’s the rush?

Once famous hedge fund manager Hugh Hendry once recounted a story during the markets trough during the financial crisis, a forlorn affair that he called correctly and positioned correctly, heavily short stocks and long treasuries. The resulting gain was about +30% for a single month, which also accompanied his clients withdrawing their money in droves, an absolute Exodus that all but marked the end of his hedge fund career.

So how could someone so right be treated so wrong?

In order to achieve +30% for a single month, one would have to take on incredible risk, the sort of risk that works both ways. Sophisticated investors understand this dichotomy, which is why managers are judged by their Sharpe and their beta and the single most important metric when sifting through returns is attempting to ascertain how much risk someone is taking in order to achieve his results.

What are my goals now?

I want to hone my craft to reduce churn and maintain consistency with my returns, whilst at the same time curating a process to know when to hedge and when to gun for alpha.

My returns the past 20 months, just 3 down ones.

Being +14% for the year isn’t a great achievement. I haven’t looked around to see what other managers are doing but if I had to guess I’m about average. More often than not my returns are much greater than average. But that’s ok and there’s nothing wrong with hitting singles and doubles, while waiting for a fat pitch.

Even though the vast majority of you reading this are retail traders, responsible for your own money, you should treat it in a professional manner and that entails building habits and systems to hold yourselves accountable. There is a reason why professionals are good and it has a lot to do with discipline and method. I was always the best trader at the firm, whatever firm I was in, a brokers broker. To this day, my professional managers call me for advice to help them manage their clients money. But that didn’t stop me from blowing myself up in 2000 and again in 2014. I had let my success melt into developing poor habits, fueled by hubris.

Nowadays, I am not too impressed by myself and only view my achievements as part and parcel of doing my job, conducting myself in a manner that is authentically professional and measured. I do not seek to return 200% per annum, but wouldn’t mind if I did.