A Doozy Of A Day

This is a doozy of a quote from Torsten Slok via Bloomberg.

Here's how treasuries did on Wednesday. 

You can see most of the selling further out the curve happened as Kevin Warsh gave his press conference which was also a doozy. The respective drops in the seven year and five year is obviously less problematic.

Is the market doing the FOMC's job? Warsh sort of said that in the presser

The next batch are semiconductors, then broad tech, the S&P 500 and SPXT is the S&P 500 excluding the tech sector. From their respective highs in June, SOXX is down 27%, XLK is down almost 15%, SPY is down 3.8% and SPXT is down less than one percent from its high which was this month, not in June.

If this event turns out to be serious or memorable (or both), I think today gave a good look of what it will look like. Excess in the AI and AI adjacent space and unreliable volatility in the bond market will be front and center. We've been talking some about the excess in parts of the tech sector and talking constantly about the unreliable volatility of bonds a lot. 

We've had similar conversations in previous big events, I'm not sure what you do if you were overweight tech a month ago with no negative convexity on board. Maybe today is the bottom? At some point, industries like semiconductors, themes like the CHAT ETF or stocks like Oracle will find a bottom, time will bail those holders out eventually, there's just no way to know what they will have to endure or for how long. I mentioned ORCL because the decline has been stunning, I would be shocked if it went out of business at the end of this but to be clear, I am not a buyer at any price. 

I think anyone who was underweight tech coming into June, no tech is not realistic, and has been avoiding fixed income duration will fair better through this, if it turns out to be serious, but I would not count on skating through with no decline. My hope would be to avoid the worst of it. My experience has been that avoiding the worst of these events is repeatable. 

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