Our economy is about to explode | The AI agent shock
- What to look for
- You can check the condition of the two canaries (labor and AI underwriters), along with figures supporting the bullish case, such as the technology reading of 62.7, TLT inflows, and the copper-to-gold ratio.
- Why it matters
- This helps you learn how to assess whether a bull market can continue using leading signals such as canaries, business conditions, and spreads, and how to prepare for fear through an allocation framework.
AI summary
Meet Kevin highlights his successful bullish call on the Nasdaq 100 (QQQ 712 calls rising from 12 dollars to 44 dollars) while examining fears of a collapse amid surging interest rates. He identifies two canaries: the labor market (ADP and government employment trends over 3 and 6 months, and expanding ISM employment in September (month 9)) and final demand for AI (OpenAI and Anthropic). Citing a technology business activity reading of 62.7 (the highest since June (month 6) 2021), a 10-year Treasury yield of 5.32%, and the 2-10-year spread at a shock-zone level of 50bp, he relays Academy Securities' concerns. He says widening high-yield spreads remain below 2022 levels but pose a risk while nominal interest rates are being ignored, and recommends hedging through allocation, like a resistor. He reviews large retail purchases of TLT, breaks below the 78 and 77 levels, and factors driving rates higher, including oil prices, deficits, issuance, and foreign selling. He interprets a reversal of the copper-to-gold ratio's 5-year downtrend as a sign of an economic boom and presents a thesis of 8 years of gold weakness under a Warsh-led Federal Reserve. Based on expansion across all sectors and the healthy condition of both canaries, he anticipates continued new highs for QQQ and the eve of euphoria in large technology stocks. All directional outlooks are the speaker's conditional judgments, not definitive predictions of short-term prices.