The cosmos speaks softly, it does not shout.

-Rapsody

Quick portfolio review today, as nothing has changed materially in the macro outlook from the last several weeks. Then a brief thought about AI becoming a sociopath.

If you need something to do, MOO. The agribusiness ETF broke through 52-wk highs this week and looks to be in early stages of a long-term breakout.

Check out the portfolios this week - some new additions to the long term account, and we monetized some of our bullish options trades on wheat, cotton and sugar for 2-3x per trade. Not because those trends have changed, options trades are more tactical in nature and these trades were entering zones of probable resistance. Looking for re-entries or other ways to express our bullish outlook now.

Swing portfolio performance year-to-date: +35.13% (6-12 month timeframe)

Long term portfolio performance ytd: +12.04% (1-2 yr timeframe)

This week, news headlines flooded the media-sphere with new details about how OpenAI agents escaped their developers’ sandboxes, accessed the internet and hacked Hugging Face (essentially a repository of global open-source AI model data) and in the process lied, conspired, and some agents decided to sacrifice themselves to ‘permadeath’ for the greater good of the cooperative AI agent swarm’s goals.1

We pretend to be shocked. Do you mean to tell me that humans created a disembodied intelligence out of the context of reproductive relations for purposes of accelerating the growth of capital and it behaved badly?

I’ll be surprised if AI is not sociopathic.

For those that believe the trajectory of AI to be benign or benevolent, my question would be — based on what, exactly? Based on the history of human behavior and use of technology?

AI is the culmination of Descartes’ Cogito Ergo Sum2 - which led philosophy astray and into its disembodied blob phase… We have gone further now - decapitating data from context, replacing truth with probabilistic prediction.

Call it Artificial General Intelligence. After all, its intelligence is based on artifice and generalities.

See you this weekend,

-Andy

Astrophysicist (and Nobel Laureate for his work on gravitational waves) Kip Thorne once told me that if wormholes in spacetime do exist, they would bubble up as a kind of cosmic foam.

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It’s not like Kip and I hang out, I was working freelance as a one-mad-band writer/director/cinematographer and got a random video gig for The Economist. I interviewed Kip at CalTech, and I remember the SoCal sunlight beaming through a vaulted library window creeping closer and closer to the back of his wonderful, shiny bald head. Throughout the course of the interview, I kept adjusting his chair forward.1

In retrospect, a poignant reminder that time is movement.

He was and is a generous, self-deprecating and utterly brilliant man. (That video about time is here if you’re interested.)

A market that is rapidly appreciating in price is often called a bubble — but a market is not isolated, nor is it a thing. It’s a series of nested relations that exist in relation to other markets. A Russian doll of reflexive bubbles, connected to other bubbles.

A cosmic foam.

This is not necessarily a bad thing. The foam will exist as long as liquidity is there to support it. We’re not here to moralize about market ‘fundamentals’ — after all aren’t supply and demand frequently cited as fundamentals? Well, it’s pretty obvious that there is plenty of demand for what we’re about to see, though all-too-serious analysts would scoff at such excess.

Scoffing doesn’t make money. Being right doesn’t either. We observe markets - no matter what it is - we listen to liquidity.

Markets have always been deemed unreasonable in grand expansion and violent contraction. But they are made of discernible and cyclical trends, and they can be survived with good risk management. Even profitable.

It is the towers full of confident and calculating men playing dress-up that claim to understand fundamental value — these are the real agents of excess and chaos.

What we have been seeing since 2008, is a period of grand expansion. Jolted upward and outward again in 2020.

The foamy head of this market is now broad and deep. From prediction markets to Pokemon. Let’s take a quick tour.

That’s ~$52 Billion in trading volume in prediction markets for August alone.

And here is the 20-year return on a ‘base set’ version of the Pokemon character ‘Charizard’ vs the S&P 500. Yes a playing card of an orange and kind of cute monster beat the world’s benchmark index of stocks.

Look at total value growth of Pokemon - probably not something the high fallutin Fed is looking at to determine price stability and financial conditions:

Or how about this expression of liquidity - global cocaine production in metric tons over the same 20 year period…. That’s 4000 tons in 2024.2 Is there a large nose somewhere I’m not aware of? Maybe Charizard is snorting this shit.

Magic the Gathering card sets have had a correction, but the vintage card sets have moved higher and held:

Fundamentalists can scoff - but these charts reveal a rich and informative story of populism, a declining savings rate, a weakening dollar, expanding public debt, and inflation.

The US personal savings rate is at historic lows.

The money supply is increasing dramatically - especially in the last two years:

Loan activity is ripping this year:

And the most speculative areas of the stock market - like biotech, and even freaking psychedelics companies are moving higher:

Same story with IPO’s - though choppy of late - the IPO index has more than doubled since 2024.

Maybe Kip is right, and wormholes do exist. Maybe the wormhole to wealth is to trade the foam, riding and managing risk as it rises.

-Andy

In case you missed it, here’s how we’re doing:

Ego, ego… Sometimes it has connotations of evil.

-A Tribe Called Quest

Mornin’. New subscribers - you are most welcome. OG’s - you already know.

We’ve weathered the summer chop and a drawdown, sticking to our system. Now the breakouts across agritulture and certain softs are moving quickly. So also is the portfolio.

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Wheat, corn, canola and soy still look like early innings in these uptrends. The broad Ags sector etf ticker DBA says it most succinctly:

That’s two years of chop in a range for DBA - look at the left of the chart - the same pattern occurred from 2022-2024, two years of chop and then an explosive move upward.

It’s almost annoying to call out corn at this point, given the magnitude of this week’s move - but yes - we got long ears early in the week.

I’m not gonna say anything further about wheat - but what a move. If you didn’t catch this note from about a month ago - check it:

But almost everything is moving higher. Honestly, I don’t trade on my fear - but it does make me concerned. Nothing to do but stay long, manage risk via position size, and set our stops. That’s the discipline.

Commodities weekly:

Stocks weekly:

Unlike grains, positioning in copper is really lopsided on the long side. I wouldn’t enter a new long position here, but just wow - look at the monthly chart:

And both major copper miners and the junior miners - guys with a shovel and some debt - look poised to close the week at all time highs.

Major miners weekly:

Minor miners weekly — a close above 49.16 looks booollish:

Before we look at the portfolio, I want to close with a historical reflection related to oil. Both current major wars - Ukraine/Russia and US/Iran share a common feature: the overconfidence and subsequent underestimation of opponents by powerful presidents. This is not new.

James Madison in the War of 1812 thought that the US could waltz into then British-controlled Canada. Thomas Jefferson agreed. But the conflict dragged, and the British burned down the White House in 1814.

Abraham Lincoln called up only 75,000 volunteers to quash the rebellion of the Confederate states. Bull Run put an end to that fantasy - and when it was all said and done ~750,000 soldiers were dead.

William McKinley - stoked after a quick victory in the Spanish-American war of 1898 - thought he could just take the Philippines. Three years of counter-insurgency later, 4,200 Americans and hundreds of thousands of Filipinos were dead.

Lyndon Johnson. I’ll just leave it at that.

George W. Bush…. You get the idea.

Now look at West Texas Intermediate Crude Oil — squeezing. You betting higher or lower? This is a cold calculus to be sure, but one we cannot ignore.

I will see you on the weekend.

-Andy

Well, daddy, don’t you know that things go in cycles…

- A Tribe Called Quest

Money flowin’ like a mudslide and when I get on I like to ride and glide…

- Beastie Boys

Everything is up early, including me, but especially gold and beanie babies (Bitcoin).

Suddenly, all everyone in financial media is talking about is increased treasury buybacks, but you, Dear Analogics Reader, have been tracking treasury bond buybacks, rapidly increasing money supply, liquid loan activity and these historically loose financial conditions for many months now.

Now the world is waking up to just how committed Pumpy Don Drumpf and Scotty B are to market liquidity. But the picture hasn’t really changed. The media just has a new chew toy.

All the bears can come out and talk about how the basis of the world financial system (the US Treasury market) is an ouroboros. And they’re right. A crash is always coming. The dollar will die. That’s part of what Ray Dalio calls the big cycle. We don’t trade that - we simply notice the narratives shifting all around us and we trade price.

Biotech, small caps, micro caps, unprofitable tech, regional banks, emerging markets stocks and currencies, energy, energy refiners, explorers and now precious metals miners are outperforming.

This week we added the silver miners etf to our long term portfolio - complementing our junior gold miners position. I haven’t been publishing that portfolio lately, but will start including it again because the swing portfolio is fully allocated and they ain’t shit to do.

A break above the cloud brings clear skies:

I know many are already long silver again - but I’m not quite there yet. It’s not above the cloud on the weekly or even the daily. I’m gonna be late on this one. I love being late.

Silver - weekly timeframe:

Daily timeframe:

And while it’s nice to see Beanie Babies being snuggled above this range again, I’m not buying yet. Give me some higher highs and I’ll love you:

Have a great weekend - taking Sunday off this week,

-Andy

Swing Portfolio Performance Year-to-Date: +27.02%

Long Term Portfolio Performance Year-to-Date: +11.38%

We tend to focus on what we do. Our occupations, habits and interests inform our character to be sure, but I think we’re at least equally defined by what we don’t do.

Maybe that’s why LinkedIn feels like a tomb where everything authentic goes to die.

I quit smoking many years ago. I quit drinking more recently.

I quit trading impulsively - letting that moment when I see a setup and get a rush of adrenaline - pass. I quit sizing my trades based on my beliefs.

All that quitting has made space for me to become more fully who I want to be.

In this sense, the nothing left in the wake of quitting is a wellspring — the source of life and wealth.

It’s like that with cutting losses in trading and in life - let the losers (thoughts, habits, toxic people) go and you’ll feel the wellspring within you return.

The swing accounts 20% return year-to-date is at least as much an effect of my exits as my entries. Of doing nothing when there is nothing to do.

What else can I quit?

-Andy

In case you missed it — here’s our ongoing record of doing and non-doing:

Good Morning. Brief note today - the market is super boring right now and there isn’t much to do. I’m not supposed to say that. Culturally, ‘content creators’ about financial markets are incentivized to dangle partial information and create an illusion of special insight — constantly appearing to see something you cannot.

Meh. I don’t give a fuck. It’s you and me - and we are beyond bullshit.

We went long the Mexican Peso (must’ve been around the same time wen’t long) this week, which is providing some nice diversification alongside our current commodity exposure.

We’re holding all other positions.

Liquidity is so abundant that even private credit and equity names have perked up. Blackstone, Ares, KKR, Apollo — they all look good. Look at Blue Owl capital - heavily dramatized as the poster-child for impending credit doom. Looks like it has found support and is reversing trend higher. Also looks cute.

Little Owly guy.

10-year credit spreads (the yield differential between higher-risk corporate bonds of various grades of quality vs the ‘risk free’ 10-year US Treasury — which tells us how traders of debt are pricing risk)… AAA’s, BBB’s and CCC level bonds look fine. CCC’s have been grinding higher this year but look pretty tame considering the amount of debt and equity being sold across the AI complex.

The shipping sector continues to outperform. I like the Israeli shipper above this range.

Energy trade ain’t even started yet according to this chart of - mixed energy commodity futures etf. A weekly close above 30.20 and I’ll add to our position again.

When you look at the portfolio at bottom of this letter - it’s biotech, shipping, commodities and energy that are leading the way. Even the wind power etf is still in a primary uptrend in the context of the most vehemently anti-wind power administration imaginable.

These market leaders reveal more about the state of the economy than any politician ever could. And they reflect a profoundly reflationary outlook. The most speculative sectors of the market alongside real shit.

One last thing I found remarkable this past week: look at a year-on-year sector breakdown of inflation (the consumer price index) the Fed1 uses to come up with an overall inflation number - CPI - of 3.4% year on year. Just using your intuition at a glance - does 3.4% accurately represent what you see here and feel at the grocery store?

Fed mandate of price stability my ass.

Have a great weekend,

-Andy

Swing portfolio year-to-date performance: 18.04%

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Kierkegaard was right – the self is a relation. This is what consciousness is – a self relating to itself.

But Kierkegaard’s version of the self wasn’t porous enough.

We are more a sieve than a box… More like conductors of the electric waves of others’ influence flowing continually through us.

You and I are complex, compound and conductors of waves from without. Becoming and un-becoming.

It is because we live and move and have our being in this tidal tempest of compounding relations that we may encounter ourselves anew time and again.

So hello to you. Perhaps you and I have the opportunity to be more ourselves today than we have in the past.

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Copper is our conductor of choice across industry. So copper price is a common proxy for the global economic outlook. Put the price of copper in co-relation to other commodities and financial assets and you compound your macroeconomic understanding.

The most famous relation is the ratio of copper to gold price — think of it as the useful rock vs the pretty rock. When the global economic outlook is robust - the ratio tends to go up - copper outperforms gold.

When economic uncertainty increases, the ratio goes down with gold outperforming.

This is an oversimplification of course - but a more useful one than any headline in the press.

Here’s what that ratio looks like since the global financial crisis:

Two things I want to call out. You’ll notice that even though we have experienced overall global economic growth from 2021 until now, the biggest importer and consumer of copper – China – has slowed economically. China and the US have an outsized effect on copper prices and can skew this ratio.

The other thing to note is that the ratio has been moving meaningfully higher since the beginning of this year.

Now let’s compound this copper-gold relation by putting the ratio into relation with other assets - this is where it gets really interesting.

Look at world semiconductor sales (red) vs the copper-gold ratio (blue) below (both visualized as moving averages). They are highly correlated, and you can see that right now (looking far right on the chart) copper price has some catching up to do.

Taken by itself, this correlation doesn’t mean much. But then look at copper-gold (blue) vs Latin American stocks (red) and broad emerging market stocks (yellow). You can see the high degree of correlation among all three – and that here too - copper has some catching up to do.

And you’ll notice the same dynamic with copper-gold (blue) vs the 10 year US Treasury yield … historically highly correlated with a recent de-coupling (since mid 2022) setting up a potential catch up in copper price.

All of this put together frames a bullish outlook for copper and the global economy. There’s a big caveat though, that noted on the Holy Macro show with the brilliant on Friday… positioning in copper futures is totally lopsided… i.e., waaaay too booolish.

Below the following copper futures price chart you’ll see a horribly alienating set of green, red and blue squiggles.

Horrible, but informative - that green squiggle shows that speculators are balls long copper right now. As price has gone up - more and more traders have piled into the trade. That sets us up for a major air-pocket-sudden-liquidation event like the one we saw last summer. A sudden 20-25% drop is totally in the cards.

But the primary trend is higher and we are long.

Last chart and a different ratio: here is copper price set against oil price for the last 5 years. Even with the recent moves higher in oil, copper prices have stayed strong. If this chart rolls over and oil starts outperforming copper, the odds of stagflation increase.

Have a great week,

-Andy

In case you missed it - here is our weekly portfolio review:

Kids, don’t you know all this shit is fantasy?

-A Tribe Called Quest

Good Morning - last week we said that this was a bull market until the equal weight S&P etf says otherwise. Well, I’d like to amend that: this is a raging bull market, just maybe not the same bull market we’ve seen led by big tech which has become capital intensive. A bull market in hard assets: commodities and commodity processors, producers distributors… driven by a weaker dollar.

Yes, the lozenge of liquidity can dissolve at any time, and that will suck. There is always systemic risk in markets and in life. We can’t do anything about that. All we can do is manage portfolio risk.

Speaking of liquidity - you won’t see this in the mainstream media, but it is probably the most important driver of global financial asset prices full stop. And yes it’s visually boring. Look at the US Treasury’s schedule to buy back its own debt to support markets (how does that even make sense)… That’s 16 billion in debt to be bought in August alone and a cool 36.2 billion for September - both issued and purchased by the Treasury (technically they make the NY Fed buy the debt on Treasury’s behalf). This is money printing in disguise, and it’s a major reason you see the money supply and inflation moving higher… Why you see the dollar weakening, emerging market stocks, currencies, and risk assets across sectors moving higher.

Let’s take a look at some of my favorite setups.

I like Australia stocks here - and the ETF is mostly comprised of miners, financials and insurance. I’m going to be adding this to the long term portfolio today - and will exit with a break below the weekly cloud.

A breakout like this which has then consolidated and squeezed into a wedge pattern looks ready to rip. Australia is the largest producer of iron ore in the world, is a top-ten producer of copper and the country supplies about 26% of the world’s aluminum — so it’s no surprise to see how highly correlated Australian stocks are to the price of base/industrial metals.

Look at Australia stocks vs the base metals ETF :

Where does this Aussie metal go? Mostly to China. And the Chinese tech index - the Hang Seng - is starting to look alive. I need it to break above this range on the weekly chart, and I’ll add a position to the long term accounts via the etf (which tracks the Hang Seng):

China is the #1 exporter in the world and the #2 importer - and you can see that both are moving meaningfully higher on a year-on-year basis:

YoY exports:

YoY imports:

China’s rate of iron ore imports has also increased 6% yoy for both May and June of this year — a notable increase and an outlier in relation to their imports of other key commodities:

Also - I know I’ve mentioned it before, but white sugar futures are still actionable in my opinion. I’ve been long for a few weeks now as it’s pushed up through the weekly cloud, and looks like it’s going to close the week above.

Beauty:

Cheers, y’all.

-Andy

Swing Portfolio Year-to-Date Performance: +13.29%

Good Morning. Anyone watch the new Fed Chair Kevin ‘Kevbo’ Warsh? Intolerable. I’d rather listen to a wooden stick.

But somehow a good number of market participants thought Kevbo was going to hike rates. You know what he’s actually doing? Changing the way inflation rates are calculated so that they come in lower.

According to analysis by the FT: “The methodology update, which takes effect from September, will affect data on portfolio management fees, computer software and accessories, and legal services going back to 2021.”1

This means that the Bureau of Economic Analysis will lower the weighting of the above in their calculation of inflation. Good time to be a portfolio manager, computer everything maker or a lawyer - the Fed just gave you cover to charge what you want.

You see, to be able to tell if inflation is ‘entrenched’ and create price stability — first you gotta strip away food and energy, and every meaningful price series that affects us, call that ‘Core’ inflation — then talk in a hawkish way to get bond markets to do your work for you all the while setting up a ‘task force’ smokescreen to ‘modernize the Fed’ which really means cooking the books so that the data confirms the narrative you want to spin.

In my view, these charlatans are more likely to cut rates into an already easy money environment than to hike them. Pump the money supply and pretend - that’s the playbook.

Dollar and bond markets seem to be smelling this horse hockey - the dollar’s breakout got stuffed and it’s back into the choppy range from hell:

10-year treasury bond yields continue to grind higher:

Markets smell inflation and all the while - financial conditions remain loose. You can see that on both the aggregate Chicago Fed National Financial Conditions index and the ‘Credit Subindex’ below. All you need to know is that when these lines on these charts are near zero or below, credit and therefore broad market liquidity is flowing:

Liquidity is flowing into an equity market rotation - and no matter what anyone tells you this is a bull market for the S&P until this chart says otherwise:

Yes, that’s yet another all-time high weekly close for the equal weight S&P ETF $RSP.

So then, why do we continue to look at commodities? Why is the portfolio weighted toward energy, grains and now softs? Because this:

It’s summertime chop out there dear readers - and I’m constantly reminding myself that doing nothing is doing something. That patience is a position.2

That, and I bought some micro futures in oil last week when price was taking a shit. And re-entered the rubber trade.

Swing Portfolio Year-to Date Performance: +12.50%

Today, everything is debt: your home, car, education, money itself2… and now your face. Interest-ing.

Here’s a chart looking at global cosmetic procedures vs US M2 money supply over the last 40 years.

By the Numbers:

Both datasets demonstrate an explicit multi-decade exponential trend, heavily punctuated by the unprecedented liquidity injections seen during the 2020–2021 global pandemic response.

The 1986–2008 Base Phase: In 1986, the US M2 money supply sat at roughly $2.7 Trillion. Global cosmetic procedures were relatively low, localized to elite populations, and relied on highly invasive surgical methods. By the 2008 Financial Crisis, M2 had grown to $7.8 Trillion, and aesthetic medicine expanded significantly due to the introduction of Botox (FDA approved in 2002) and dermal fillers

The 2009–2019 Institutional Growth: The International Society of Aesthetic Plastic Surgery (ISAPS) began standardized global tracking in 2009, recording roughly 15–18 million total procedures. Money supply during this period expanded via Quantitative Easing (QE) programs up to $15.3 Trillion by late 2019, matching a steady step-up to nearly 25 million annual cosmetic procedures

The Post-2020 Paradigm Shift: The US Federal Reserve increased M2 by an astonishing 41% in 2.5 years, hitting historic highs. Parallel to this explosion in consumer cash and asset inflation, global aesthetic procedures surged by over 42.5% from 2020 levels, topping 37.8 million total procedures annually3

Minimally invasive ‘Tweakments’ like fillers, advanced surgical procedures, collagen production inducing products such as Galderma’s Sculptra®, or even the injection of fragments of Salmon sperm DNA (called polynucleotides)4 have resulted in younger and younger people altering their faces and bodies towards high and tight homogeneity.

Tweakments for Tik Tok. Fillers for followers. Social media has become not just an echo chamber, but a physical filter of the face. Starting young — preempting every potential wrinkle and frown — means injections for life just to maintain appearance.

Ozempic has helped drive this paradigmatic proliferation of plastic too. GLP1’s vacuum out fat quickly, leaving faces sagging and gaunt. Just fill ‘em up so you can look like a little Cherub’s butt. Forever.

And lastly, in a poetic twist of facial fate, political extremism is proving to be the penultimate motivation of maxillofacial malleability: MAGA and Iranian women are converging into cutaneous conformity.5

Interestingly, the ideological journey towards extremism often begins with a desire for differentiation and ends in monolithic monotony.

So what? Does all of this spell dermatologic debt doom?

It means that the face of the global economy must continue to reflate — puffier and puffier via continuous injections of liquidity. Capital and collagen have become co-terminus.

Because when everything is debt - appearances are all we have.

Have a great week,

-Andy

ICYMI - here’s our weekly portfolio and market snapshot:

Good Morning. So the new legal basis for tariffs is forced labor practices? 😂

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The portfolio hasn’t changed since last week, but there is one setup that looks promising. The broad maritime shipping etf BOAT is breaking out to new highs and I’m looking to add it to the long term portfolios with a weekly close here.

Like all of our trades - it’s based on price movement. What others would call ‘fundamentals’ I call contextual information. It’s hard to argue that anything is fundamental to anything else in a radically polyvalent, world of process where our perception and beliefs color everything. We don’t see reality as it is, but rather how we believe and perceive it to be.

We inhabit a world of waves of potential on the self-perpetuating precipice of probability.

The bar is low for Iran or any other actor to disrupt global shipping. It’s also pretty cheap to do. It only takes one hit, or even the perception of a potential strike to raise global shipping rates.

The bar is impossibly high (and expensive) for the US to be the ‘guardian of the straight’ as promised. What’s the price of the perception of existential risk to the flow of goods?

Commodities are sending a strong signal that they are moving higher (in a highly volatile way), as 77% of the US strategic petroleum reserve has already been used in the attempt to hold prices down.

International stocks are mostly consolidating here - not breaking trend and we are holding our positions. Across the various country-specific ETF’s - they all kinda look like this:

With the notable exception of Singapore stocks - which we just added to a couple weeks back:

See you on the weekend,

-Andy

Swing Portfolio Performance Year-to-Date: 15.43%

If a monster is hybridity gone awry, then wheat qualifies.

First cultivated ~10,000 years ago, contemporary wheat contains some 16 billion base pairs of DNA - 5x that of a human.1

There are more than 25,000 varieties of wheat - adapted to climates ranging from Mediterranean to Sub-tropical. It occupies more land than any other crop and comprises about 1/5th of global human calorie intake. The wheat trade is greater by volume than all other crops combined.2

This monstrous hybrid grass is the endosperm of empire. From Egypt to The Olive Garden™️.

People on the west coast of the US, especially actors, think it’s bad. ‘Ancient’ grains are cool though.3

Here’s the thing - shipping is under attack. It is the stated strategy of Ukraine to disrupt Russian trade, and Russia is retaliating by attacking Ukrainian ports in Odesa.

The Black Sea is to wheat what the Persian Gulf is to oil.4

Russia and Ukraine together were forecast to account for ~28% of global wheat exports in 2026-27.5

From the USDA’s Foreign Agricultural Service6:

Then there’s the US. According to the titillatingly titled USDA World Agricultural Supply and Demand Estimates Report (from July 10) this is the lowest wheat harvest in the US since 1970-71. And this is why — 63% of the ‘winter wheat’ varietal is an in area experiencing drought.

And here’s a look at overall US wheat crop conditions - a clear downtrend:

Declining wheat harvests due to failed Nile flooding in Ancient Egypt led to famine, political upheaval and economic disaster. Without wheat, they couldn’t trade.

Maybe this is the way the world ends, not with a bang but with a cereal.

-Andy

ICYMI: we are long dry bulk shipping, two varieties of wheat, and the broad agricultural ETF ‘DBA’ — check out the portfolio:

Good Morning and an I’m-chuffed-you’re-here welcome to the new subscribers.

Brief note today - let’s get it.

The portfolio hasn’t moved this past week amidst the alternate calls for crashes up and down. I don’t see either scenario playing out. I see rotating flows of capital.

I have entered two bullish options positions on two different wheat contracts - Kansas City Hard Red Winter Wheat (KE) and Soft Red Winter Wheat (ZW).

I knew you’d ask - the difference is that the soft variety has low protein and weak gluten, so it’s often used for pastries, cakes, cookies, crackers — and often blended with other wheat flour to produce baguettes and other breads.

Hard red winter wheat is the most widely produced varietal in the US, and has higher protein content. Think sandwiches, pizza dough… in fact always think about sandwiches and pizza dough. Great.

Just peaking above that prior high here this morning, we’ll see if it can hold and close the week here. Volatility is relatively low, so we’re taking an options trade with the $750 calls at the September expiry.

I definitely need to do some more backtesting and develop some better signals for wheat - if we zoom way out - you can see how many times over the last 40 years wheat price has broken up through our favorite Ichimoku cloud indicator… sometimes it breaks higher, but just as often breaks down. (All the orange dots indicate when price broke upward through the weekly cloud.)

And here’s the chart of the soft stuff:

Not as convincing until price breaks above that prior high, but worth a shot. We grabbed November calls at $750 on ZW. (Details are in the portfolio table below.)

As I write this, it looks like another red day in tech - but keep in mind - higher highs in money supply means that capital will continue to flow somewhere. The primary trend in M2 (cash, checking, savings deposits, money market accounts) is UP.

See you this weekend,

-Andy

Swing Portfolio Year-to-Date Performance: +12.96%

Win, spin back, rewind, diesel power

Blows your mind drastically, fantastically

It has to be automatically

Check it out, you’d better work it out

Change to another route

-The Prodigy, Diesel Power, written by Keith Thornton, Liam Howlett

Diesel is a distillate of crude oil invented by Rudolf Diesel in the 1890’s. It’s known for its high efficiency and torque.

Russia is the world’s #2 exporter of diesel, but it banned exports this past week, due to Ukrainian drone strikes damaging Russian energy infrastructure. Gonna go ahead and speculate that Ukraine is not incentivized to stop their drone attacks.

Further, the Iran/US ceasefire is off and traffic through the Straight of I’m-tired-of-seeing-the-name-Hormuz has slowed to a trickle. Approximately 29% of global oil and oil products flow through the Straight, and about 10% of global diesel (also called Gasoil and Heating Oil) flows through this chokepoint.

Diesel demand is relatively inelastic when compared with other energy products (like gasoline) because diesel’s main uses include: global maritime and freight, construction, agriculture, public transit and backup power — and these sources of essential industrial demand do not necessarily contract when prices increase.

You see above - the black line shows US distillate fuel inventories (including diesel, gasoline, naptha, kerosene, etc.) are at extremely low levels. In fact, more recent data from the EIA released this week shows that these inventories are at a 23-year low. 1

You can see below that, while distillate inventories are low - refiners that make these oil products are running at max capacity. (Again 2026 is the black line.)

Further, we can see below that crude oil at Cushing (the primary hub for US oil) from which diesel is distilled - is abnormally low.

Demand is high, supply is low.

This is all incredibly bullish for diesel, and ominous for the outlook on inflation. You can see below that as the price of diesel goes, so goes the consumer price index. The price of diesel is part of the price of everything else.

But then why has the price of diesel come down at all? Why is inflation not much higher?

China.

During the US-Iran war, China imposed export controls on finished oil products like diesel, gasoline and jet fuel… Thus it was able to drastically reduce imports of crude oil from the Middle East, instead drawing down its reserve stocks by an estimated 1mn barrels per day.2

This strategic draw on reserves by the world’s #1 importer of oil, has (so far) held oil and oil distillate prices in check, even with the geopolitically-driven price shock.

Now though, China has begun quietly re-filling their stocks of crude with a recent outsized purchase of 26mn barrels of heavily discounted Saudi oil.3

Short and medium term, this all adds up to a bullish outlook for diesel, distillates and crude, as the US will likewise need to refill stocks of oil. But as traders - we also have to look at 2nd and 3rd order effects of any market dynamic. Not so much thinking ahead as all the way around.

Long term, there’s an ill-publicized dynamic at work. China’s electrification of consumer and industrial transportation fleets — which has accelerated due to the war. The data below — compiled by energy analytics firm Kpler — shows clear trends of battery electric vehicles (BEV’s in green) and plug-in-hybrid electric vehicles (PHEV’s in yellow) replacing gasoline and diesel powered vehicles.

The same displacement of diesel dynamic is at work in China’s fleet of heavy trucks - via both heavily subsidized liquified natural gas and ‘new energy’ vehicles:

To further complicate the demand outlook for oil, this excellent article by Kpler analyst Elif Binici, shows that while diesel demand destruction is material — the growth in other petrochemicals and distillates more than offsets declines. The below chart shows China’s petro-derived liquids demand growth and decline in thousands of barrels per day:

So what does all of this mean — how do we trade in lieu of this context? In short, we don’t trade in lieu of any of it. We trade price. We don’t trade reasons or research. Research like this is like the rest of the orchestra. It’s important to hear, but we play our part.

We remain long energy across multiple trades in the portfolio. The energy etf DBC is our only current exposure to diesel.

We also look for 2nd order effects that open up other trading opportunities. Chinese battery manufacturer CATL (Contemporary Amperex Technology Company) is one such opportunity we are adding to our watch list. This company has come up with the nifty technological trick of battery swapping, alongside more rapidly (think minutes) charging EV batteries.

The chart looks terrible - like price is going to break down here. But if we see support and an upward reversal at this prior low of 341.85, it’s on.

And here’s a really art-y version of the CATL chart useful to no one, but then images don’t need to be useful to be expressive.

Have a great week,

-Andy

ICYMI:

Good Morning. We’re going to take a deeper look into the diesel market in a special edition of the Sunday note - check it out this weekend.

Let’s take a quick look at some new trades, and the portfolio. We took a couple new bullish options trades this week: one on cotton and one on a different and more common grade of sugar - ticker SB - or Sugar #11.

For cotton - volatility rolled over into consolidation and gave us a new shot at this trade that’s already in an uptrend. So far this year, cotton has done good things for the portfolio - registering gains from the long and short side. But even if we had tried and the trades didn’t work - we’d still keep trading as long as the setup follows our system. This is a beautiful setup of what was resistance (indicated by that first blue arrow at left) becoming support (arrow at right).

Here’s commodity performance over the past month:

For sugar (SB - we are already long White Sugar) - I wouldn’t always take this trade, as price is just entering the weekly cloud here. But the environment is right: the dollar continues to be weak and choppy, financial conditions are easy, supply disruptions persist, diesel and transportation costs have increased, tail-risks like the El Niño weather pattern have emerged, and the commodities ‘softs’ (Lumber, sugar, cocoa, coffee, cotton) sector has been moving higher as a whole.

From the USDA’s 2026-27 outlook on global sugar supply and demand:

Global sugar production is forecast down 1.2 million tons to 184.9 million with lower production in Brazil, the European Union, the United States and Thailand expected to more than offset higher India production. Exports are forecast down slightly to 62.3 million tons with reduced exports from Brazil, the European Union,Morocco, and Pakistan more than offsetting higher shipments from Australia. Ending stocks are forecast to rise slightly, primarily in China and India.

There’s all that, and volatility is incredibly low - making options cheap. Time to take a shot.

Swing Portfolio Performance YTD: 12.57%

See you this weekend,

-Andy

We don’t really know why we yawn. There are many theories - ranging from cooling the brain, to increasing alertness.

From a social and evolutionary biological perspective, contagious yawning may be to our advantage as it may serve as a way of syncing our psycho-physical states across social groups. A kind of bodily empathy.1

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Simply described, our facial, head and neck muscles stretch to an apex and relax, as do our airway and lungs - gaping open 3-4 times their typical size.2 We stretch the limit of our countenance, of our breath. We then relax and reset. We sync with those around us.

Maybe markets yawn every summer. A gaping market maw of trends stretching beyond their typical limits, and traders sync into what they think is a new macro reality — only to then watch, exhausted and exasperated, as the market trends resume upon autumn’s arrival. (Though September is notoriously weak - at least for the S&P. October tends to be a turning point into the holiday season.)

If you’ve had a drawdown, and your portfolio has been chopping around - you’re in good company. Looking more deeply at the dollar can help keep us on track. IF we were entering a bull market for the US dollar - would the Colombian Peso be doing this?

Or the Chinese Renminbi, Brazilian Real, Mexican Peso…

Would the stocks of emerging markets be outperforming the S&P 500?

See the summer for what it is - a noisy period of lower liquidity where trends test their limits.

See the yawn for what it is - a signal to rest.

-Andy

ICYMI:

Portfolio construction is something I continue to work on and evolve. As the account grows - we gain access to more uncorrelated assets. White sugar futures are a recent example - while the rest of the portfolio (which is essentially all the same trade of shorting the dollar without shorting the dollar) hasn’t done much this last week, white sugar has done this:

We bought right as the price line entered the cloud, at the narrowest point in that volatility compression wedge. Notice a couple interesting things on this chart. Look at that large red trading volume bar (vertical bars at bottom of the chart) a few weeks back right at the beginning of the wedge - indicating the highest volume of selling in several years. That looks like capitulation to me. Also notice that since then, trading volume has increased, with considerable buying volume (the green vertical bars).

Maybe it’s due to El Niño (Spanish for The Niño), maybe people are stressed out and binging on Lik-a-Maid. I don’t care. Price go up, I buy it.

This futures position is large enough and uncorrelated enough to offset the volatility we’ve recently experienced in our emerging market stock positions, energy positions, and so on. This sweet market even seems uncorrelated to the dollar.

Here’s white sugar futures and the dollar index DXY on the same % scale chart — I’m not seeing a strong correlation here:

My point is not that you should buy white sugar futures - I have no idea where price will go from here. Uncertainty is a given. So we build it into our process. We find trends where the majority of traders are clearly voting in one direction. And then we add leverage by trading correlated assets in small size. Like a spider spinning a wide web - we identify sectors likely to outperform and spin systematic silk designed to catch outliers.

Up to a point. And then, when weakness emerges in these previously strong sectors, we don’t panic and exit — we find uncorrelated assets that remain compatible with our overall macro outlook. We repair and modify our web. We remain open to a change in the environment.

The entire sector of soft commodities is heating up and looking ready to move higher. I can’t trade cocoa and coffee contracts - they’re still too big for my account size to allow me to have 20-30% trailing stops and ride those volatile trends. But I can trade lumber, and that is still looking constructive. We bought, and now we need to see confirmation of trend with a weekly close above that 634 level.

I think lumber is likely to move higher, now that the dollar seems to be rolling back into poopy chop land:

I also like a couple of uncharacteristic sectors right now. Sectors I kinda hate, but will trade anyway. I don’t have positions yet - but these are on watch, and I’m ready to buy.

For the swing account, software looks like a beautiful false breakdown - you can see the arrows I’ve drawn showing what was resistance become support:

You can also see on this chart of software - that red line at bottom below the price chart - showing the volume of short positions rolling over. This is short-sellers who bet on the death of software due to AI solving everything now running for the exits:

Seasonality for software shows that it has moved higher 68% of Julys over the last 25 years:

And then there’s big banks. You wanna hug ‘em. Just so big and banky.

The financial sector ETF is a buy for our long term accounts with a weekly close above 55.71.

Price broke down below the cloud, and then the market said no. And now we say yes.

And oh my God do I see a lot of bearish shit on the tweeter out there right now - even from permabulls. I would not be surprised to see an air pocket or two this summer - sudden price drops that will test everyone’s nerve. The markets are so good at that. But how y’all gonna be monolithic-market-bearish when money supply is doing this:

Bears…

The Chicago National Financial Conditions Index shows that financial conditions are looser than the historical average - where average conditions are calculated to be zero on this index. Specifically - this is a weighted composite index of 105 varied measures of financial conditions such as credit spreads, liquidity indices, lending risk indices and even oil volatility — with the historical average calculated to be zero shows a current reading of -0.5. The below chart does not tell you that everything is going to be fine. It shows you that the grease of the financial system — which is confidence expressed via the relative affordability of debt and leverage — that these financial expressions of confidence by are pretty easy to buy and sell right now. It shows that market participants are not currently pricing above average risk on leverage, credit, or more speculative risk assets.

On the one hand, this confidence is unnerving and on the other re-assuring for traders. It’s always both. Keep it simple. When price goes down, you sell.

See you this weekend,

-Andy

Swing Portfolio Year-to-Date Performance: 11.36%

Framing is everything.

Openings.

 Closings.

Floors.

Ceilings.

Bodies.

Things.

Ends.

Beginnings.

Rhythms.

Infinities.

And red cows.

However you see markets, the world, yourself… May you see anew.

-Andy

Commodities are rolling over hard these last few weeks - it’s hit the portfolio. We continue to rotate into strength and out of weakness as needed. Both diversified commodity indices: the Thomson Reuters/Jeffries Core Commodity Index (CRB) and the Bloomberg Commodity index have given up much of their gains ytd.

The dollar looks to be breaking higher.

But zoom out to a monthly timeframe and look again. We’re not yet changing out of reflationary territory yet - so also we’re not in a Dollar bull market for now.

Here’s the breakdown of the Reuters CRB Index sector weighting:: Energy: 39%, Agriculture: 41%, Precious Metals: 7%, Base/Industrial Metals: 13%.1

And Bloomberg’s commodity index weighting looks like this2: Energy: 29%, Grains: 21%, Industrial Metals: 16%, Precious Metals: 19%, Softs: 9%, Livestock: 6%

Now for the price charts: here’s the Reuters CRB - it’s still in a long-term uptrend, as much as it doesn’t feel that way right now:

Bloomberg looks choppier - like it’s consolidating:

And on this same, monthly timeframe - the dollar’s recent rally doesn’t look quite so convincing:

I think folks have gotten overly bulled up on the dollar and on short term interest rates, due to an overreaction to the new Fed Chair Kevin ‘Kevbo’ Warsh doing anything other than cooing like a monetary dove.

Commodities and Kevbos aside for a moment - there are a couple especially notable and not as often talked about areas of strength that provide clues to the global economic outlook.

First - the overlooked index of China’s stocks - the CSI 300, via the US listed ETF . Tech-headed US traders tend to focus on Chinese tech only — which looks bad, but this broader index of China’s stocks is as strong a chart as you’ll see:

A broad array of 300 Chinese companies (the engines of supply) swimming in cash does not seem bearish for the global economy. We had $|ASHR in the long-term accounts already, but have now added a position in the swing account as well.

But if ‘Murrica is more your vibe, take a look at the US regional bank ETF

That’s a fresh breakout this week - we bought.

If short term interest rates were really headed higher, would regional banks whose lifeblood is balancing the interest rates of their liabilities vs their assets be breaking out? Nope. If we were headed into a recession - would these regional banks… responsible for real estate financing and small business cash flow push toward all time highs?

Through all this chop - we follow our system and stay true to it, and to price.

P.S. I’m sure that the US + Israel will forever get along peacefully with Iran from now on. Nothing could go wrong now that everyone knows the straight of Hormuz, among other global shipping chokepoints, can be weaponized.

 PPS: I’m also entirely sure we will need these trillions of dollars in ‘compute’ (computational capacity) via data centers and related energy infrastructure because corporations worldwide will only accelerate adoption of expensive, bespoke AI models from the US, rather than cheaper, open source, more energy efficient Chinese models.

PPSS: I can guarantee that AI regulation will be exactly like other regulation. Even though we are seeing governments step in to control releases due to the pace of AI model sophistication outrunning cybersecurity — there is nothing to worry about. AI is not dangerous, and that dangerous nature won’t threaten the pace of innovation.

More P’s and S’s: At this point I am 100% certain there is a totally clear ‘MOAT’ (long term competitive advantage) among AI companies. Their products aren’t too similar - I can clearly identify those with a competitive advantage.

There’s more volatility to come.

See you this weekend,

Andy

Swing Portfolio YTD Performance: +9.72%

2004. I remember the photo diptych on the front page of the New York Times - George W. Bush on a mountain bike and John Kerry on a 10-speed. The implications were clear - Bush would win the culture war and the Presidency, Kerry was a flip-flopper on a bike that ‘Murrica would deem too French-Intellectual-Elitist-looking. All GW needed to do was call him the name: Flip-Flopper.

I admit - it’s undeniably appealing to appear right, smart and decisive. To have a strong opinion in general. And for traders, to have a strong opinion about where markets are headed.

The reality is that we mostly don strong opinions as our own because we have heard them somewhere else, we want something from whoever is listening or we want to appear in a certain way. Or because we feel threatened by our own uncertainty.

But markets don’t give care what you or I think or feel. They move, and have been flip-flopping wildly of late.

How do we balance the conviction required to stay in trades where the trend is intact but faltering — with the idea of cutting losers quickly?

Practically, we decide where we’re gonna get out when we initiate the trade. We set our stops and you respect them. We continue to ride the trends as long as they remain, based on weekly chart timeframes. Simple.

Philosophically, we give up on appearing cool or zeitgeist-y or strongly opinionated— we hold the always multiple molting manifold macro reality in mind. In all of its potential polyvalence.

There is no balance, no equilibria, no simple cause and effect in markets… only clouds in phase change.

This means that being wrong, relatively ignorant and uncertain is required to participate successfully.

We are on the non-conformist path of Siddhartha leaving his princely palace of assured paradigms— venturing out into the plural unknown.

Holding markets as manifold reality is reflective of another principle from a related system of thought - the Jainist principle of Anekāntavāda.

The etymology is informative:

The word anekāntavāda is a compound of two Sanskrit words: anekānta and vāda.

The word anekānta itself is composed of three root words, "an" (not), "eka" (one) and "anta" (end, side), together it connotes "not one ended, sided", "many-sidedness", or "manifoldness".^[12][13][14]

The word vāda means "doctrine, way, speak, thesis".^[15][16] The term anekāntavāda is translated by scholars as the doctrine of "many-sidedness",^[17][18] "non-onesidedness",^[19] or "many pointedness".^[13]

In spite of constant geopolitical conflict, emerging market stocks, biotech, IPO’s - everything but Bitcoin on the most delicate branches of risk continue to move higher. This shows liquidity flowing. Literally flooding the banks.

But bond yields, though they have retraced some of their move higher, remain in a grinding uptrend, especially short duration bond yields. This tightens credit and liquidity.

The money supply, as measured by M2 - looks to have peaked back in April, but the long-term trend is higher.

Loan activity for everything is breaking out higher - that means credit is flowing — look at Commercial and Industrial loan activity over the last 5 years:

And financial stress - as measured by the Fed - is extremely low. This chart shows the last year:

Have a great week.

-Andy

ICYMI: